Fitch downs growth forecast |
Ratings agency Fitch said it would revise down its India growth forecasts for the fourth quarter of 2016 after the government’s shock move to pull high-value currencies out of circulation. Fitch Ratings said the move, aimed at forcing Indians to declare their untaxed money, had created a cash crunch that “seems to be holding back economic activity”, with consumers unable to make purchases, supply chains disrupted and farmers unable to buy seeds.Time spent queueing in banks is also likely to have affected general productivity. The impact on GDP growth will increase the longer the disruption continues, but there is already need to revise down forecasts to reflect what will almost certainly be a weak 4Q16. India, the world’s fastest-growing major economy, operates largely on cash and huge queues have formed outside banks and ATMs in cities across India as people try to swap their old notes for new ones. Fitch said there were “considerable uncertainties” about the potential benefits, particularly as new, higher-denomination notes are introduced to replace the banned bills.
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