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Demonetisation impact: World Bank downgrades India's growth estimate for 2016-17
Due to demonetisation, the World Bank today downgraded India's growth estimate for 2016-17. Though the World Bank has said that the country will post a "still robust" growth of 7 per cent, it's comparatively lower to its previous estimate of 7.6%.

"Indian growth is estimated to have decelerated to a still robust 7 per cent (in fiscal 2017 ending on March 31, 2017), with continued tailwinds from low oil prices and solid agricultural output partly offset by challenges associated with the withdrawal of a large volume of currency in circulation and subsequent replacement with new notes," the report said.

Even at a growth rate of 7%, India is set to retain its position as the world's fastest growing economy. China, another major economy is forecast to grow at a rate of 6.7% in 2016.

It also said that the government's immediate decision to ban high-end notes could "continue to disrupt business and household economic activities."

The World Bank has also said that it expects the demonetisation to have an impact on the next quarter as well. "Weak industrial production and manufacturing and services purchasing managers' indexes (PMI), further suggest a setback to activity in the fourth quarter of FY2017," the report said.

It also said that demonetisation could pose a risk to other important reforms such as GST and labour reforms.

"Further, the challenges encountered in phasing out large currency notes and replacing them with new ones may pose risks to the pace of other economic reforms (e.g. Goods and Services Tax, labour, and land reforms)," the report said.

The Bank, however, said that India is expected to regain growth momentum in the coming years, with 7.6 and 7.8 per cent expansion because of various reform initiatives that are expected to unlock domestic supply bottlenecks and raise productivity.

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