Dr. Niranjan Hiranandani’s views on GDP Growth Rate


India has retained the title of ‘the world’s fastest growing major economy’, with annual gross domestic product (GDP) growth for the October-December 2016 period being reported at 7.0 percent. I am delighted by this statistic and hope it results in positive sentiment across different sectors of the economy.

Economic data and Statistics are something that evokes positive sentiment – at times, disagreement. The latest data shows annual gross domestic product (GDP) growth for the October-December 2016 period at 7.0 percent, which is lower than 7.4 per cent clocked in the previous quarter – and, higher than what was forecast by many experts and economists, as quoted in media reports over the past few months.

Given that it was the first such event across the world, there exists no previous data which would help gauge the impact of demonetization on the Indian economy, and largely the presumption was that India being a cash-driven economy, it would bear the brunt of demonetization in form of a fall in the GDP growth rate.

The digital payment model which was pushed by the Central Government post demonetization has resulted in huge amount of money being transacted through banking and the institutional financial route, effectively pushing up numbers across different sectors of the economy. Logic says the additional amounts which were routed through organized financial institutions and digital financial options would result in higher numbers; the deposits in form of the demonetized Rs 500 and Rs 1000 notes would also add to parameters which comprise the ‘organized, formal economy’.

Which brings us to the data released on 28 February 2017: it puts India’s GDP growth of 7.0 per cent for the Oct-Dec 2017 Quarter, higher than China’s 6.8 percent growth for the last three months of 2016 – suggesting that India retains the sobriquet of being the world’s fastest growing economy. We will see responses to this largely in line with political thought: the ruling coalition at the Centre will laud the data, those in opposition will question it.

I would look away from the political posturing aspect, and consider the same from the perspective of Indian real estate. The impact of demonetization came down to one basic issue: markets where cash was a major component reportedly slowed down. For Indian real estate, demonetization was part of a series of government-lead reforms, including RERA, GST and the law on ‘benami’ ownership of property, which will change the dynamics of real estate industry. During any changeover, a slow-down is invariably seen; this will be the scenario in segments which will make the shift to ‘less-cash’ and ultimately, ‘cash-less’ mode of transactions. Once this happens, the recovery will be swift and quantum of buying will go up as buyer confidence will rise on enhanced transparency in Indian real estate.

As an industry, real estate will post lower sales figures for the quarter Oct-Dec 2016, this will largely be because post any major move on part of the Government – like demonetization – potential buyers would tend to wait and watch before they go ahead with planned transactions. The Hon’ble Finance Minister Shri Arun Jaitley, in his recent Budget Speech, gave the real estate industry as also home seekers aspects to cheer – and I am sure the positive sentiment will positively impact sales figures for Indian real estate by the quarter Apr-Jun 2017.

In the midst of all this, the GDP growth figures released on 28 February 2017 suggest positive sentiment can be pre-poned, given that India has clocked a GDP growth of 7.0 per cent in the Oct-Dec 2017 quarter. While political pundits and economists will continue to debate over the methodology and what aspects of the economy were covered, I think that positive statistical data should augur well for the Indian economy – as also for real estate.

Dr. Niranjan Hiranandani is Founder & CMD, Hiranandani Group. His recent initiative is Hiranandani Communities. He is the Founder and First President (Maharashtra), National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing & Urban Poverty Alleviation, Government of India.

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