After note ban, India to see 7% growth in first half of FY18: Sources

Several economists have said demonetisation could drag down growth in FY18 to 6.5%

India expects growth of around 7% in the first half of the next financial year, two officials said, painting a rosier picture for the economy than many economists after Prime Minister Narendra Modi’s shock move to abolish large banknotes.

Nearly 90% of transactions used to be in cash in India, which was gripped by a severe shortage of currency after Modi's November 8 decision to take Rs 500 and Rs 1,000 notes, out of circulation overnight. Several economists have said the move could drag down growth in FY18 to 6.5%, as small businesses fired workers, consumer demand fell and farmers' winter sowing efforts were hit. 

Demonetisation  has become a major election issue in states going to the polls this year, such as Uttar Pradesh, where the performance of Modi's ruling Bharatiya Janata Party could shape his political future.  The Budget leaves Modi little room to hand out large, populist sops, despite demands by politicians, businessmen and other lobby groups for relief to the industry and taxpayers.