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“The immediate withdrawal of a large volume of currency in circulation and subsequent replacement with new notes announced by the government in November contributed to slowing growth in 2016,” the World Bank said.
However, it classified India’s economy as “still robust” and forecast that GDP growth would bounce back in coming years.
“India is expected to regain its momentum, with growth rising to 7.6 per cent in Fiscal Year(FY) 2018 and strengthening to 7.8 per cent in FY 2019-20,” the report went on to say.
While the World Bank appeared to acknowledge that the negative impact of demonetization would likely be short term – with the positives resting in liquidity expansion in the banking system, it did warn that 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 BRICS Post with inputs from Agencies