Fitch sees 7% growth in December quarter

 Global rating agency Fitch on Tuesday joined the critics of India’s economic growth numbers which posted an acceleration of 7% in the October-December quarter.

“This number looks somewhat surprising as real activity data released since demonetisation pointed to weak consumption and services activity because these transactions are cash-intensive. By contrast, official data suggest that private consumption was strong in October-December,” Fitch said in its latest Global Economic Outlook, adding that one reason for discrepancy could be the inability of the official data to capture the negative effect of demonetisation on the informal sector.

“However, the formal sector also remained surprisingly robust. This raises the possibility that these initial estimates of the growth impact of demonetisation could well be underestimated, with the possibility of revisions to official GDP data later on,” Fitch said.

The rating agency’s comments comes a day after the Reserve Bank of India cast doubts on the veracity of the December quarter numbers. Deputy Governor Viral Acharya cautioned that the impact of demonetisation could spill over the next financial year 2017-18.

Central statistical organisation has also projected a 7.1% growth rate for the economy as a whole. Fitch, however, is in conformity with this projection. “Gradual implementation of the structural reform agenda is expected to contribute to higher growth, as will higher real disposable income, supported by an almost 24% in civil servants’ wages at the state level,” the agency said.