So maybe demonetisation never really happened. Maybe it was all a bad dream: the late evening announcement, the subsequent cash crunch, the regulatory chaos, the deaths because people could not get medical treatment with old notes. Maybe the reporters who described all the job losses and migrant workers forced to go back home and farmers unable to get their sowing done in time and so on were all affected by a mirage. Maybe those who conducted surveys and found massive drops in sales, in consumer spending, in livelihoods of informal workers and self-employed people were similarly deluded. And of course, all the economists who predicted significant declines in economic activity as a result of this drastic measure were clearly caught in this mayajaal as well.
This is certainly what the Central Statistics Office’s latest GDP estimates for the third quarter of 2016-17 (October-December) would suggest. The stately progress of the Indian economy appears to have been completely unaffected by demonetisation, if these data are to be believed. In the third quarter of the year, GDP is estimated to have grown at 7%, bringing the growth estimate for the full financial year to 7.1%—exactly what was predicted in the CSO’s advance estimate, which explicitly did not factor in demonetisation.
Effectively, what the CSO’s statisticians are telling us is that demonetisation had no impact on the economy, and the trajectory of economic activity in the quarter in which it occurred continued exactly the same as it would have done anyway.