Negative impact of note ban on economy reversing: S&P

The negative impact of demonetisation on economic activity has begun to reverse, S&P Global Ratings said today.

In its APAC Economic Snapshots, S&P also said that fiscal deficit target of 3.2 per cent for the next financial year announced in Budget is "reasonably ambitious".

"The negative effects of India's demonetisation on economic activity have begun to reverse. However, it is still far from returning to pre-November 2016 trends," it said.

India had on November 8, 2016, announced demonetisation of 500 and 1,000 rupee notes. The US-based agency had in December said note ban will have a "higher disruptive impact" on informal, rural, and cash-based segments of the economy.

S&P has recently revised downwards its estimated economic growth rate for 2016-17 by one full percentage point to 6.9 per cent to reflect the disruption caused by the surprise move of demonetisation.

With regard to macro economic indicators, S&P Global Ratings said inflation eased further in January, driven mainly by food and fuel, and the Reserve Bank kept its benchmark repo rate on hold at 6.25 per cent.

"The Indian government announced a reasonably ambitious fiscal deficit target of 3.2 per cent of GDP in the fiscal year ending March 2018, keeping the headline indicator on an improving trend," it added.

In Budget, the government announced lowering fiscal deficit to 3.2 per cent in 2017-18 from 3.5 per cent in current fiscal.

(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)