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Crisil slashes GDP growth by 100 bps to 6.9% for FY'17

Agency says that it expects the CPI-based inflation to print lower at 4.7% as compared to its earlier estimate of 5%

Press Trust of India  |  Mumbai 

CRISIL cuts rating for J&K Bank deposits on asset quality concerns

Expecting economic recovery from to take a couple of months, ratings firm today lowered the country's growth forecast by 100 basis points to 6.9% from 7.9% earlier for the current financial year.

At the same time, the agency said it expects the consumer price index (CPI)-based to print lower at 4.7% as compared to its earlier estimate of 5%.

"Assuming that it will take at least a couple of months for the situation to normalise, we have sliced 100 basis points off this fiscal's growth to 6.9% from 7.9% estimated earlier. The jolt to demand will also pull down," said in a report.

"We believe the crunch will impact private consumption demand (55% of GDP) directly, and cull growth in the third and fourth quarters of the current financial year," it added.

Calling it the '8/8' move — or the announcement made by Prime Minister at 8 pm on November 8 -— to demonetise Rs 500 and Rs 1,000 bank notes, said, "The problem is, the infusion of replacement notes has been very sluggish and the ensuing choke has pulled back the business cycle, which was beginning to accelerate on the back of a good monsoon, the seventh pay commission pay hike, and the one rank one pension scheme for veterans".

Noting that there is uncertainty on how much time it will take for the economy to return to 'business as usual', Crisil said that uncertainty coupled with a fall in consumption demand and inventory build-up, will push back recovery in private corporate investments.

Additionally, it said that the problem "gets compounded because of a preponderance of transactions in the humongous informal sector, which cannot be accurately measured or monitored".

First Published: Thu, December 01 2016. 21:48 IST