New Delhi, June 1: India has lost its ‘fastest growing major economy’ tag to China after the Gross Domestic Product (GDP) gwth figures fell to 6.1 per cent for the last quarter of FY 16-17. The downfall in growth can be primarily attributed to the demonetisation of the Rs 500 and Rs 1,000 notes that the Narendra Modi government carried out in November 2016.

The data was released on Wednesday by the Central Statistics Office (CSO). The report pointed out that the annual GDP growth rate for the financial year 2016-17 was 7.1 per cent. The figure was at a three-year low. The growth rate was dragged down by the figures of the final quarter which stood at 6.1 per cent.

For the same quarter, the Chinese economy reported a GDP growth rate of 6.9 per cent. This comes as a jot, as India had steadily outperformed China in every quarter since 2015. The Indian growth story, which is largely pushed by greater purchasing, a factor that was affected by demonetisation to a large extent.

While the implementation of the Goods & Services Tax and the abolition of income from indirect taxes will continue to adversely affect the growth rate in the current quarter, it is largely believed that the impact of demonetisation will not be visible in the current financial year. 

The next report of quarterly GDP estimate for the first quarter of FY 2017-18 ie from April to June will be released on 31st August. While the sectors that were most affected include construction and financial services; the growth rates in various sectors are as follows:

  1. Agriculture, forestry and fishing: 5.2 per cent
  2. Mining and quarrying: 6.4 per cent
  3. Manufacturing: 5.3 per cent
  4. Electricity, gas, water supply and other utility services: 6.1 per cent
  5. Construction: -3.7 per cent
  6. Trade, hotels, transport and communication: 6.5 per cent
  7. Financial, real estate and professional services: 2.2 per cent
  8. Public administration, defence and other Services: 17.0 per cent

Meanwhile, the Gross value added (GVA),  grew only by 5.6 per cent in the final quarter. The figure is at an eight-quarter low. Commenting on the state of GDP growth, the President of India’s Federation of Indian Chambers of Commerce & Industry, Pankaj Patel said, “Even though the GDP growth for 2016-17 is in line with the estimate put out earlier this year; the quarter four numbers do point towards moderation which can be attributed to the ban of high denomination currency notes last year. However, the process of remonetisation is almost complete and growth impulse is gradually gaining momentum.”

He said, “Government has completed three years in office and the spate of reforms being undertaken is laying a solid foundation for future. Despite persistent global headwinds, India’s economy has been able to move on to a steady growth trajectory.” The latest Economic Outlook Survey released by the FICCI has predicted that the GDP growth will remain at 7.4% in 2017-18.