Most economist and analysts were keenly waiting for the CSO's advance estimates of Q3 2016-17 to understand how demonetisation had impacted the economy. The numbers released by chief statistician TCA Ananth though left most economists scratching their heads to make sense of the data.
The CSO estimates essentially said that demonetisation had practically nil - or at best a marginal effect - on GDP growth. More surprising, consumption actually went up, as did manufacturing output when cash was scarce.
The government made the most of it, with the Prime Minister even making a statement that hard work was more powerful than Harvard (presumably an economics degree from Harvard) in one of his election speeches. Economic affairs secretary Shaktikanta Das said that the economy was back on track and there was no reason to doubt the CSO numbers.
But respected economists point out that the numbers are perhaps rosier than they should be - and some of it is frankly unbelievable. One was the private final consumption expenditure estimate, which the CSO estimated was up 10 per cent in Q3, double the 5 per cent growth in Q2. Did demonetisation actually create a jump in consumption? In an interview to the Business Standard newspaper, former chief statistician Pronab Sen (and former boss of TCS Ananth) gave one explanation. In quarterly estimates, there is no direct measure for expenditure. Instead, it is extrapolated from production data, specifically from production of consumer goods.
There were other anomalies. For example, how did manufacturing go up sharply in this period when the IIP for December 2016 had actually contracted - it was 0.4 per cent lower than for December 2015. Equally, outstanding bank loans to industry year on year at end December showed a contraction of 4.3 per cent. So how did manufacturing grow at 10.1 per cent for the quarter while credit was coming down?
Several reasons have been proffered by analysts for this. One is that the Q3 date for 2015-16 was revised downwards sharply by the CSO, which created a favourable base effect. If the original estimates of Q3 FY16 were to be taken, the growth for this year's third quarter would have been much lower. Equally, quite a few analysts talk of channel stuffing - that is inventory build up in the system. What has gone out of the company warehouses to distributors may not necessarily have all been bought by consumers. So while the goods were counted as part of the GVA, the consumption expenditure was probably an over estimate.
More importantly, the estimates were based on results declared by companies for Q3, which was with the ministry of finance. But only the big, listed companies had given their data till then, which were then extrapolated to come up with the estimates. The consensus was that demonetisation effect would have hit medium and small companies much harder - and data for that would be available much later.
And then, there is the fact that the informal economy - which was the hardest hit - did not reflect in the data at all. Some of it would reflect in future numbers.
The feeling is that there is a good chance of the current estimates being revised downwards (though they could equally be revised upwards) sometime in the future.
But till a lot more data trickles in, it is best to treat these numbers as what they are - estimates but not absolutes.