India's GDP growth will be better than Chi's: Fitch Rating

Cheni, Nov 25: While there are many facets to India’s demonetisation measure making it difficult to predict the impact on real gross domestic product (GDP) growth, the growth will still be higher than Chi’s in the medium term, said Fitch Ratings. In a statement, the credit rating agency said it expects India’s GDP growth trend higher than Chi’s in the medium term. “In Chi, we forecast real GDP growth of 6.4 per cent in 2017, down from a projected 6.7 per cent in 2016, due to the impact of recent macro-prudential tightening measures targeting the housing market,” he said. In October 2016, Fitch forecast 7.4 per cent growth for the current fiscal for India. Fitch also added that the growth would accelerate to eight per cent only by 2018-2019, on account of a lagged impact of monetary easing. “A significant decline in the growth number for this quarter is highly likely, but for the fiscal year as a whole the decline may still be relatively moderate,” he said.

There are many elements to the demonetisation, which makes it difficult to quantify the impact on real GDP growth and explain the wide range of forecasts by different alysts, he said. According to him, on the positive side, the demonetisation may improve the fiscal position to the extent more earnings would be declared and a transfer was possible from the RBI to the government of the seigniorage (profit from the difference between the face value of the currency and cost of production) earned from unchanged notes. (IANS)