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Goldman predicts dip in GDP Growth to 6.8% in FY17 post-demonetisation

Goldman Sachs has forecast a deceleration in India’s GDP growth to 6.8 per cent this fiscal, down from 7.6 per cent last financial year, due to demonetisation. 
●    According to Goldman Sachs, post the ‘dramatic currency reform’ the liquidity shortage would be a significant constraint on domestic activity, which in turn would affect GDP growth.
●    “In the short term, the liquidity shortage appears likely to be a significant constraint on domestic activity, leading us to forecast a deceleration in GDP growth to 6.8 per cent in FY17 (below consensus), down from 7.6 per cent in FY16,” Goldman Sachs said in a research note.
●    Eventually, the currency reform should help to move economic activity into formal channels, accelerate financial inclusion, and increase government revenue. 
●    According to the report, the “large, young, lower-income” economies of India, Indonesia, and the Philippines have higher growth potential — in theory. 
●    But in practice, much will depend on domestic policy and the pace of economic reform.
 

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