Indian Prime Minister Narendra Modi’s administration sought to refute concerns that the clampdown on cash would strip India of its status as the world’s fastest-growing big economy.
Gross domestic product, which grew a slower-than-estimated 7.3% in July to September, will slump to 6.5% over the next quarter, according to the median estimate in a Bloomberg survey of 14 economists. That’s weaker than the previous 7.8% projection and the 6.7% forecast for China.
“At the moment all these statements are based without data,” TCA Anant, the government’s chief statistician, told reporters in New Delhi on Wednesday. “Assumptions can lead people to all sorts of conclusions and I don’t want to contest at that level. I would rather suggest you wait for the data.”
A steep economic slowdown risks hurting foreign investment into India and voters’ perceptions of Modi before key state elections next year. While supporters say his November 8 move to abruptly invalidate 86% of currency in circulation will help curtail tax evasion and graft, critics say it will dent demand in an economy where almost all consumer payments are in cash.
“Attention has already turned to the impact of the government’s demonetisation measures, which could cause significant disruption in the current quarter and possibly beyond,” Shilan Shah, Singapore-based India economist at Capital Economics Ltd, wrote in a report after the GDP data. The central bank will lower the policy rate to 6% from 6.25% at a December 7 review to “cushion the blow,” he said.