New York, March 7: Several international agencies have praised the policy of demonetization led by Modi government and said the economy of India will remain healthy and remain fruitful. Demonetization will also empower the economy of India. Notably, Global rating agency Fitch has projected India's GDP growth to 7.1 percent in current fiscal before stepping up to 7.7 percent in the next two financial years.
In its economic survey, Fitch state that Indian economy will grow by 7.1 percent in the current fiscal before stepping up to 7.7 percent in the next two financial years. The US-based agency has termed the 7 percent GDP growth for the October-December quarter as surprising and a tad lower than 7.4 percent in the previous quarter.
It said the December quarter GDP number suggests that economic activity was hardly hit by the cash crunch after the government's move to remove 86 percent of currency in circulation overnight.
Fitch said gradual implementation of the structural reform agenda is expected to contribute to higher growth, as will higher real disposable income. Fitch projection of growth for this fiscal is in line with the estimates of global think-tank The Organisation for Economic Co-operation and Development, OECD. The rating agency said it expects the policy interest rate to stay at its current level of 6.25 percent.
However, the International Monetary Fund (IMF) in a report last month has predicted that India’s GDP growth will go down due to temporary disruptions caused by the Union government’s demonetisation drive. “Growth is projected to slow to 6.6 percent in the financial year 2016-17, and then rebound to 7.2 percent in the financial year 2017-18, due to temporary disruptions, primarily to private consumption, caused by cash shortages,” the IMF said.
Meanwhile, The International rating agency Moody's Investors Service also predicted that India will be the fastest-growing economy among G-20 countries clocking a 7.1 percent growth in the year 2017. However, after demonetization, many institutions and political parties slammed government and said the economy of India will be affected negatively. Some leaders also claimed demonetization to be the biggest scam of the decades.
Background: On 8th November 2016, Prime Minister Modi suddenly announced the decision of demonetization. This step was taken primarily for curbing of corruption, black money and terrorism. After that PM Modi, Finance Minister Arun Jaitley, RBI Governor and known economists have said that the demonetization will have a short-term negative impact but a long-term positive impact.