India’s government wants you to believe that demonetisation didn’t slow down the economy

• A revision from India’s Central Statistics Office (CSO) pegged economic growth in the period after demonetisation at a much higher level than previously forecast.
  
• The CSO revised growth during the year ended March 2017 at a whopping 8.1%, compared to original estimates of 7.2%.
  
• The reason cited? A revision of output and price estimates from most sectors, especially agriculture and manufacturing, based on the “latest data”.
  

Amidst the deafening noise around budget 2019, the Indian government just slipped in an update to old data on economic growth. A revision from India’s Central Statistics Office (CSO) pegged economic growth in the period after demonetisation at a much higher level than previously forecast.

The office, which falls under the Ministry of Statistics and Programme Implementation, revised growth during the year ended March 2017 at a whopping 8.1%, compared to original estimates of 7.2%.

The reason cited? A revision of output and price estimates from most sectors, especially agriculture and manufacturing, based on the “latest data”.

This is in stark contrast to research by many prominent Indian and foreign economists that indicates that the Indian economy came to a grinding halt because of demonetisation and millions of jobs were lost. Even the National Bureau of Economic Research, a US-based think tank, weighed in, saying that demonetisation reduced growth by 2 percentage points in the quarter ended December 2016.

In the few quarters following the note ban, the SME sector took a huge hit as a number of small businesses shut down due to lack of working capital, farmers weren’t able to sell their produce and delayed the sowing of crops for a new season, normal banking operations were disrupted and investment plummeted, according to the Centre for Monitoring of Indian Economy (CMIE).

Speaking on the new numbers, SK Ghosh, the chief economist at the government-owned State Bank of India, told ET that the revised numbers “turn the story of a slowdown beginning from Q2FY17 on its head.”

The slowdown was further exacerbated by the botched rollout of GST. Growth for the first quarter of 2017-18 fell to a three-year low of 5.7% - something that has been revised upwards.

At the time of demonetisation, the government claimed the pain would be temporary. Now, two years later, and despite overwhelming evidence against it, the latest update is being seen as insistence from a vehement government that demonetisation was not a colossal blunder.

The government’s habits have lead to dissent within its ranks. Earlier this week, Chairman PC Manohan and JV Meenakshi - the only external members of India’s National Statistics Commission resigned owing to the government’s shelving of jobs data and the release of revised GDP series.


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