Demonetisation to hold back India's 2017 fuel demand growth
India's fuel demand growth is expected to slow by as much as 40 percent in 2017 from last year as a government-induced cash shortage hurts businesses, industry and car sales.
The dent in demand growth in the world's third-largest oil consumer is expected to be temporary, though, with India still taking up the third-biggest portion - behind China and United States - of 2017's rise in fuel use on a barrel-per-day basis, according to energy consultancy Wood Mackenzie.
India's fuel demand in 2016 grew at its fastest in at least 16 years as low oil prices boosted demand for gasoline and aviation fuels, but analysts say the nation's currency troubles will put the brakes on this year.
India's oil product demand growth in 2017 is expected to drop to 160,000 barrels per day (bpd), from 270,000 bpd in 2016, according to Woodmac.
"We see Indian demand growth slowing ... due to the recent currency demonetization drive by the Indian government," said Suresh Sivanandam, the consultancy's Singapore-based senior manager of Asia Pacific refining research.
Prime Minister Narendra Modi's currency crackdown has led to a cash crunch that has severely hurt India's overall output and consumer demand, with December factory activity contracting in its biggest monthly decline in eight years and last month's car sales dropping the most in 16 years.
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