Confirming fears of the move hitting growth, Japanese brokerage Nomura on Wednesday said its proprietary indices have dipped to the lowest levels since 1996, with rural consumption showing the maximum impact.

"Our proprietary indicators suggest sharper near-term slowdown after demonetisation," it said, adding that while the slowdown is only partially visible in the November data prints, the full growth impact is likely to be seen only in the December data.

The report said that move has hit rural consumption demand harder than the urban demand.

The Nomura Composite Leading Index (CLI) for India for early 2017 has slumped to the lowest level since the series began in 1996 and is consistent with GDP growth of below 6 per cent, it said.

"This suggests that there is downside risk to our Q1 growth projection of 6.9 per cent, that is near-term growth may fall much more than expected," it said.

The report mentioned that there is a likelihood of industrial production rebounding in November as against -1.9 per cent in October on factors like higher diesel consumption (where older notes were allowed), but will soon fade in December.

The brokerage said rebound in the economy will depend on how quickly policymakers remonetise and added that it expects the cash crunch to end by February and growth to start recovering only from the June 2017 quarter.

It's Nomura Economic Surprise Index for India (NESII) fell in mid-December and given its negative momentum, risks are skewed towards further downside surprises in data in the coming months, the brokerage said.

It also said that with the continued slowdown, Reserve Bank of India (RBI) will cut its policy rate by 0.25 per cent in February 2017 review of the monetary policy.

It can be noted that there has been a rash of cuts in the estimates of GDP growth by analysts, following the surprise move by the government to scrap the Rs 500 and Rs 1,000 notes on November 8, with some cutting their expectation by up to 3.5 percentage points.