India's GDP growth stays healthy at 7.3% in Q2, but rating agencies predict bleak outlook post demonetisation

India's  Gross domestic Product (GDP) for second quarter grew at 7.3% versus 7.1% quarter-on-quarter. July-September will be the last quarter before PM Modi's bold and risky move to demoentise 500- and 1,000-rupee notes on November 8.

GDP at base year 2011-12 prices in second quarter of 2016-17 is estimated at Rs 29.63 lakh crore, as against Rs27.62 lakh crore in Q2 of 2015-16, showing a growth rate of 7.3 percent, mentioned Central Statistical Office. 

The Gross Domestic Product (GDP) or national income was 7.6 per cent in the second quarter of the last fiscal.

Commenting on the GDP data, Chief Economic Advisor Arvind Subramanian  said, "it's good news, indication in improvement of underlying strength of economy;specially good for private sector. Nominal GDP growth picked up a fair amount, accelerated from 10.4 to 12.1." 

Read | Demonetisation: Fitch Ratings lowers India's GDP growth forecast in FY17 to 6.9 per cent from 7.4 per cent

According to the data released by the Central Statistics Office (CSO), the Gross Value Added (GVA), which is estimated at the basic price, showed a growth of 7.1 per cent in the second quarter of 2016-17, compared to 7.3 per in the year ago perio

The GDP growth data is calculated under the new methodology at market price, while GVA is calculated primarily at factor cost. GDP is GVA plus taxes on products, minus subsidies on them.

The sectors which registered growth of over 7 per cent in July-September quarter are 'public administration, defence and other services', 'financial, insurance, real estate and professional services', 'manufacturing' and 'trade, hotels and transport and communication and services related to broadcasting', the data said.

Read | Morgan Stanley downgrades its GDP growth forecast for current fiscal to 7.3 per cent from 7.7 per cent

Growth in agriculture; forestry and fishing; mining and quarrying and construction is estimated to be 1.8 per cent, (-)0.4 per cent, and 1.5 per cent respectively. 

Rating agency Fitch has already lowered India’s GDP growth forecast for current fiscal to 6.9 per cent from 7.4 per cent, mentioning there will be “temporary disruptions” to economic activity post demonetisation.

“Economic activity will be hit in 4Q16 (September-December) by the cash crunch created by withdrawal and replacement of bank notes,” the report added.