A report from credit rating agency Icra says country’s gross value added growth is likely to be at 6.6 per cent in 2016-17 as economic activity will take more time to normalise following the Government’s move on demonetisation of high-value notes
“Although currency liquidity is likely to improve significantly by the end of January 2017, economic activity may take longer to normalise, based on which we have revised our forecast for GVA growth in 2016-17 to 6.6 per cent,” added the report
It said the pace of revival of economic activity in the fourth quarter of the current financial year is likely to take a cue from how quickly currency in circulation gets replenished and digital transactions become more widespread.
Between November 10 and December 19, banknotes of `5.9 trillion were issued to the public through the banking system, as indicated by the Reserve Bank, equivalent to an estimated 38 per cent of the value of currency that ceased to be legal tender.
RBI has also clarified that it has issued 22.6 billion notes of various denominations to the banks for distribution, including 20.4 billion in small denominations (`10, `20, `50 and `100) and 2.2 billion of `500 and `2,000.
“The loss of income in some sectors and deferral of consumption is likely to weigh on capacity utilisation in the second half of 2016-17, delaying capacity expansion plans of the private sector,” the report said.