MUMBAI: India Ratings and Research ( Ind-Ra ), a part of Fitch Group has revised India's gross domestic product ( GDP ) growth forecast for FY17 to 6.8%, 100bp lower than its earlier projection of 7.8%, as it expect the demonetisation or "delegalisation" drive to hit investments.The downward revision is a fallout of the disruption caused at various levels in the economy due to the de-legalisation of banknotes of Rs 500 and Rs 1,000 denominations from midnight of 8 November 2016, the rating agency wrote in its report. Analysis by Ind-Ra shows that the economic cost of the de-legalisation will be Rs 1.5 trillion for FY17."While there are no two opinions about the need to root out black income, Ind-Ra’s analysis shows that at best the current measures are likely to destroy Rs 4.004 trillion worth of cash held in black money and fake currency. This constitutes a mere 12% of the black economy in India, leaving 88% of the black money to remain in the system", wrote Sunil Kumar Sinha and Amit Jain in their four page report.Ind-Ra expects that on the demand side, the GDP component that would be the worst hit is investment, particularly private investment, which is already down and out due to various reasons, which will face the brunt of the de-legalisation. The rating agency expects gross fixed capital formation (GFCF) for FY17 to grow at 2.0%, down 306bp from their earlier projection.They also anticipate that with the decline in cash holdings in the hands of the people and severe restriction in the flow of new cash, consumption demand has fallen impacting both wholesale and retail sales. Looking at anecdotal evidence Ind-Ra says that the cash squeeze has reduced sales in the informal sector by 30%-40% during the first fortnight following the de-legalisation, therefore it expects private final consumption expenditure (PFCE) to grow at 7.5% in FY17, 89bp lower than its earlier projection.Ind-Ra has also criticized the "shoddy preparation and implementation" of the Indian government which it says has caused more pain than it should be. Besides criticizing the timing of this move which comes is in the middle of marriage and festive season."The timing of this announcement is somewhat baffling, After two consecutive bad monsoons the rural economy has just started looking better, with festival, marriage season just begun and exporters, particularly MSME segment in the process of producing/dispatching their export orders to cater to the Christmas demand, " analysts from Ind-Ra said.But all is not downhill from here, the rating agency says noting some positive spin-offs from demonetisation move. It believes that the government’s resolve to promote the digital platform for transactions will gradually increase the share of the formal sector and expand the tax base of the economy in the medium-to long-term. Also, as transactions through the digital platform increase, it will create financial and transactional history of the informal/cash dependent segment, making them ‘bankable’ over the medium-to long-term.