With the twin shocks of demonetisation and the goods and services tax (GST) disrupting economic activity, India’s economic growth slowed to 6.6 per cent in FY18, down from 8.2 per cent in FY16 (Chart 1). But as seen in Chart 2, growth did pick up in the third quarter of FY18, rising to 7.2 per cent from 6.5 per cent in Q2FY18, suggesting that the effects of demonetisation and the GST are fading away.

And while both manufacturing and investment activity slowed in FY18 (Chart 3), there are some signs of a revival in both. On inflation, there is reason to cheer. The headline ...