Notes Ban Effect To Spill Over To Next Quarter, Says Viral Acharya

Notes Ban Effect To Spill Over To Next Quarter, Says Viral Acharya

In the October-December quarter, the economy grew at a better-than-expected rate of 7 per cent as compared to economists' estimate of 6.4 per cent.

The remonetisation pace, according to Viral Acharya, has been quick.

The effects of demonetisation are likely to spill over to the next quarter in some segments of the economy, Reserve Bank of India Deputy Governor Viral Acharya said today. The remonetisation pace, according to Dr Acharya, has been quick and should be completed in two to three months. Dr Acharya took charge as deputy governor at the central bank in January.

In the October-December quarter, the economy grew at a better-than-expected rate of 7 per cent as compared to economists' estimate of 6.4 per cent. The statistics department also maintained its full year (2016-17) growth target at 7.1 per cent.

Some economists were surprised at the higher-than-expected GDP data. "Given the fact that a lot of data seems to be counter-intuitive, we expect some downward revision in 3QFY17 GDP as more data, particularly from the informal sector, is captured," said Teresa John, economist at domestic brokerage Nirmal Bang. 

The positive effects of demonetisation will be visible from April and the completion of remonetisation process will drive consumption going forward, Economic Affairs Secretary Shaktikanta Das said last week. "As the process of remonetisation progresses, and it is almost near complete, any adverse effect on consumption during that quarter is not likely to spill over to next year. So that phase is over, it is behind us," Mr Das said.

In a shock move, the government on November 8 last year announced a ban on high value bank notes of Rs500 and Rs 1,000, taking out about 86 per cent of currency in circulation. A severe cash crunch followed and that led many institutions, including IMF, to downgrade their GDP forecast for India.