India GDP data will show how well it weathered demonetization

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India's gross domestic product (GDP) for the calendar first quarter, due later Wednesday, will offer one of the first clear readings on whether demonetization ended without a hangover.

Analysts forecast GDP growth of 7.1 percent on-year for the January-to-March quarter, according to a Reuters poll, compared with 7.0 percent in the fourth quarter..

The demonetization program, which started in November, removed 86 percent of India's currency in circulation by recalling existing 500 ($7.47) and 1,000 ($14.93) rupee notes and later gradually replacing them with newly printed 500 and 2,000 notes.

With much of India's economic activity still cash-based, that had a chilling effect on business.

In a note on Wednesday, Mizuho said it expected only a mild tick upward in GDP growth, to 7.2 percent.

"As we had observed with the fourth-quarter release, the GDP data appeared to have understated the impact of de-monetization to begin with, given that consumption and investment growth had both accelerated rather than decelerated," Mizuho said.

"As a corollary, re-monetization impact will also be more subdued given a firmer-than-expected base from the fourth quarter as well as lingering de-monetization in early first quarter," Mizuho said.

DBS forecast 6.9 percent growth for the quarter.

"Consumption demand likely benefited from an easing cash crunch, soft inflation and positive real disposable incomes," DBS said in a note on Monday.

But it noted, "Public spending entered a seasonal weaker quarter while private investment growth stayed subdued."

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