India finance minister denies currency overhaul hurt growth

India's finance minister said a massive currency overhaul that disrupted commerce across the country last year had little effect on the economy, a day after India reported a slowdown in the fourth quarter of the fiscal year.

Finance Minister Arun Jaitley pointed Thursday to global economic factors as well as banks' debt burdens for the slowing growth in gross domestic product to 6.1 percent in January-March, compared with 7 percent in the previous quarter. The country's statistics office, meanwhile, blamed weaker expansion in manufacturing, agriculture and construction.

Worldwide, "economic growth has slowed, trade has shrunk, and there have been protectionist noises in major economies, along with geopolitical uncertainty," Jaitley told reporters.

Two years of poor harvests, due to inadequate rainfall, also hurt the agricultural sector, which accounts for more than 13 percent of the economy and provides work for about half of the country's 1.25 billion people.

The government's growth projection for the fiscal year was left unchanged at 7.1 percent, despite the financial upheaval triggered last Nov. 8 when India scrapped most of its currency notes without warning. That was possible because the government revised growth upward in the first quarter, from 7.2 percent to 7.9 percent, as well as the second quarter, from 7.4 percent to 7.5 percent.

A growth rate of 7-8 percent "is a fairly reasonable level of growth and very good by global standards," Jaitley told reporters, while lauding the demonetization drive for having increased banking, online trade and the overall tax base. "We have set a new normal after demonetization. It is no longer safe to deal in cash. We have shown decisiveness in policy making."

Analysts disagreed with Jaitley on the impact of demonetizing 86 percent of India's cash supply. For weeks, Indians were left scrambling for currency notes and waiting in long lines at ATMs that were often empty. Many small businesses in the cash-dependent economy, especially in real estate, tourism, transportation and gold and gems, were hit hard.

"The lower-than-anticipated fourth-quarter GDP number reflects the lingering impact of demonetization," said Shubhada Rao, the chief economist at Yes Bank in Mumbai.

The research head of trading firm Angel Broking agreed, and said the slowdown was expected after the currency overhaul. However, "we do not expect demonetization impact to spill over" into fiscal 2017-18 "as multiple sectors are showing signs of recovery as well as a positive thrust from the normal monsoon," Vaibhav Agrawal said in a statement.