This statement contains information that has become available since the staff report was circulated to the Executive Board. This information does not alter the thrust of the staff appraisal.

1. India’s Central Statistical Office (CSO) released an advance estimate of real GDP growth for FY2016/17 (April-March) at 7.1 percent, down from 7.6 percent in FY2015/16. This advance estimate, which was produced for use in the forthcoming FY2017/18 Budget, only captures data through October and thus does not include the impact from the currency exchange initiative (which commenced on November 8, 2016). In late February the CSO will release GDP data for the third quarter (October-December, 2016) of FY2016/17, which will include the effects of the currency exchange initiative.

2. The replacement of currency notes is proceeding gradually. The latest official data released by the Reserve Bank of India (RBI) suggests that as of December 19, 2016, currency notes worth about 38 percent (Rs 5.93 billion) of the value of the demonetized currency notes have been reissued. At the same time, over 80 percent of the old currency notes (Rs 12.44 billion) have been deposited into bank accounts. On January 16, 2017, the RBI increased the daily withdrawal limits for ATMs from Rs 4,500 to Rs 10,000, and the weekly withdrawal limit for current accounts from Rs 50,000 to Rs 100,000.

3. High frequency indicators generally confirm a significant slowdown in activity following the announcement of the currency exchange initiative. The index of industrial production rose by 5.7 percent in November 2016, but was driven mainly by volatile components, while the orders-to-inventory ratio contracted. After a sharp contraction in November, PMIs remained depressed in December (PMI for services at 46.3; PMI for manufacturing at 48.6). Bank credit growth has continued to decelerate, falling to a decadal low of 5.1 percent at end-December. Amid subdued domestic demand, CPI inflation softened further to 3.4 percent (year-over-year) in December from 3.6 percent in the previous month. Food prices, particularly fruits, vegetables and pulses, led the decline.

4. International reserves have declined by US$ 1.1 billion thus far in 2017, standing at US$ 359 billion as of January 6, 2017. International reserves represent about 8 months of next year’s imports of goods and services. Net portfolio investment outflows (both equity and debt) amounted to about US$ 900 million so far in January 2017. Foreign direct investment inflows have been steady, amounting to US$ 27 billion during the first eight months of FY2016/17. Official intervention data indicates that the RBI’s net spot sale of foreign currency amounted to US$ 3 billion in October and November 2016, with outstanding net forward and futures purchases of foreign currency standing at US$ 1.9 billion at end-November. The Indian rupee remains near its end-December 2016 levels, at about 68 rupees to the U.S. dollar. Although export growth recovered to 5.7 percent in December from 2.3 percent in November, a decline in import growth to 0.6 percent from 10.4 percent points to subdued domestic demand.

5. The GST Council, in its ninth meeting on January 16, 2017, reached a consensus regarding the sharing of administrative powers between the central government and state governments in assessing tax payers under the GST. However, detailed rate schedules and draft legislation still have to be finalized and approved by the Parliament and state Assemblies before the GST can be implemented, most likely by July 1, 2017.