Will India lose the tag of the fastest growing nation in the world?

Market participants across India and those global investors who have stakes in Indian economy via equity investments are keen to understand the impact on GDP, the current demonetisation move  may have.

If media reports are to be believed the consensus seems to be building on half a per cent to one per cent negative impact on the economy due to one of the harshest financial policy decisions in the form on banning Rs 500 & Rs 1000 notes, which constituted almost 86 per cent of the total currency in India.

Care rating agency has revised the GDP growth downward by 0.4 per cent to 7.4 per cent from 7.8 per cent. ICRA & ICICI have revised the growth to 7.2 per cent from 7.6 per cent, Deutsche Bank from 7.5 per cent to 6.5 per cent, HDFC from 7.8 per cent to 7.3 per cent, Goldman Sachs from 7.9 per cent to 6.8 per cent, whereas Ambit Capital has the most negative view on the impact of demonetisation reflected in estimated downward projection of 3.5 per cent from 6.8 per cent for the current fiscal.

A double-digit GDP growth of 10 per cent plus, after discounting the negative impact sounds like a distant dream now.

With several of the research houses pegging down the GDP growth by half to one per cent, India risks losing the tag of the fastest growing nation in the world as China is expected to grow steady at 6.7 per cent for the coming fiscal.  In case India’s GDP growth slows by more than one per cent to 6.5 per cent from the current 7.6 per cent, there is all probability that India will be the second fastest growing nation.