After the Central Statistics Office (CSO) on Tuesday pegged GDP growth at 7 per cent for the October-December period and retained the overall growth projection for FY 2016-17 at 7.1 per cent, most economists are now looking for factors that explain this surprisingly ‘positive number’ post-demonetisation.

Due to the crippling effect demonetisation has had on consumption and investment, eyebrows were raised among experts and economists on the method adopted on the entire calculation of these numbers. Madan Sabnavis, chief economist at Care Ratings said, “It is a positive surprise. I do have inhibitions in the manner the GDP numbers are being calculated. The reality is that demonetisation did impact construction, real estate and trade sectors. Since the CSO now collatez data from profit and loss accounts of companies, many of the SMEs and informal sector is left out.”

The CSO’s GDP numbers came from calculations on the basis of the data captured in the formal sector and since majority of the economy is informal, the department estimates the numbers to be the same as the informal sector. Sabnavis added that the numbers are vindication that demonetisation didn’t have a major impact on the economy. They have looked at all the numbers at their disposal and have come out with their estimates.

The GDP projection surprised many economists as it was feared that Prime Minister Narendra Modi's black money crackdown will put the economy at risk of losing its growth story as the country is largely a cash-driven economy and demonetisation had squeezed the cash flow for months.

Pranjul Bhandari, chief economist, HSBC India said, “CSO may inadvertently be exaggerating the growth print because it has no way to collect informal sector data over the short run, which is likely to have been hurt most by demonetisation. The rapid 8.3 per cent growth in manufacturing may well be reflecting this.”

Soumya Kanti Ghosh, chief economist at State Bank of India, in his report highlighted revisions to GDP growth data for previous quarters. The downward revision in growth for comparable quarter of last year impacted the numbers. “GDP growth for the first and second quarters of FY16 has been revised higher. But growth for the third quarter of FY16 was revised lower. This would have had some impact on the headline number for the third quarter of FY17,” Ghosh wrote in his report.

P Chidambaram, former Union finance minister in an interview to a television channel said, “The GDP numbers have come as a bit of a surprise. The 7 per cent projection by India's Central Statistics Office is completely out of line with other projections including estimates made by the IMF, the Reserve Bank of India (RBI) and the Center for Monitoring Indian Economy. All these are very credible institutions which have made credible forecast in the past, so I think we’ll have to take this number for what it is for the time being and examine it closely.”

However, the doubts over the quality of data collection continue to loom large as evidence suggested massive job cuts following the note ban in the country’s vast informal sector, which employs nine out of 10 workers. But the government as well as the RBI maintained the pain would be short-lived and predicted a sharp economic rebound as new currency comes back into circulation.