<b>Statsguru:</b> Economic activity falters after demonetisation

Leading indicators suggest economic activity has been disrupted after demonetisation. 

As Chart 1 shows, vehicles sales plummeted in December. This decline was driven largely by a fall in sales of two-and three-wheelers and medium and heavy commercial vehicles. 

Surprisingly though, sales of passenger vehicles contracted by a mere 1.3 per cent in December, suggesting that perhaps urban demand may have remained resilient in the face of demonetisation.

Bank credit to industry slowed sharply after demonetisation as shown in Chart 2. This suggests that corporate credit demand, a function of both capacity utilisation and domestic demand, continues to remain low. 

Nikkei’s