Goldman Sachs slashes Indian growth estimates amid currency crackdown - BBG
|Bloomberg reports that Goldman Sachs economists, led by Nupur Gupta, cut their estimates for inflation-adjusted output for Q4 2016, citing a sharper-than-initially-estimated fall in consumer sentiment and industrial production amid the demonetization drive.
Goldman on Tuesday also further downgraded its outlook for the 2017 fiscal year, predicting that the Indian economy will expand by 6.3% y/y, compared with a Bloomberg median estimate of 7.3%.
Last month, the Goldman economists cut their 2017 GDP-growth projection by 1 percentage point to 6.8%, citing the potential for business disruptions in light of the liquidity shortage.
Goldman Sachs noted, "Given a limited quantity of new currency notes, the first few weeks since the currency reform have seen a shortage of cash, and consequently a significant reduction in consumption activity given that nearly 80 percent of overall consumption takes place in cash. Some of the impact is being mitigated by the substitution of cash with credit cards or electronic wallet payments, or with informal credit, but it is clear that the shortage of cash is having a significant impact on near-term activity."
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