Country Economic Forecasts > India

Demonetization has raised the possibility of further macro policy easing to support short-term growth

The near-term impact of demonetization is likely to be substantial, pushing 2017 GDP growth down to 6.7% y/y. But the economy should be past the worst by the end of Q1 2017, as cash liquidity normalizes, and we expect growth to surge to 7.5% in Q4 on pent-up consumption demand.

Despite the short-term economic costs, we view demonetization as a positive medium-term reform. It could bolster investors' faith in India's fight against corruption and encourage foreign investment over time, provided the pain is short lived, as we expect.

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