Eco Survey: Deflation stalks India, farm loan waivers might hit GDP by 0.7%

Real interest rates too high at 4.7%; Indians holding 20% less cash after demonetisation

In the second volume of the Economic Survey for 2016-17, which was released on Friday, Chief Economic Advisor Arvind Subramanian argued that the Indian economy faced significant short-term concerns, saying it was subject to strong deflationary pressures.

The growth outlook was more subdued than when the first volume was presented just before the Union Budget for 2017-18 in February; the Survey said all indicators “pointed to a deceleration in real activity since the first quarter of 2016-17, and a further deceleration since the third quarter”. The Survey retained its prediction of GDP growth in 2017-18 coming in at between 6.75