Reflecting the impact of Prime Minister Narendra Modi’s demonetisation drive, Gross Domestic Product (GDP) growth for the quarter ended December 31, 2016 contracted to 7 per cent.

“GDP growth for the third quarter (Oct-Dec) estimated at 7 per cent,” Central Statistics Office (CSO) said on Tuesday.

"Advance GDP growth estimate for current fiscal pegged at 7.1 per cent, the same as projected earlier,” it added.

The third quarter number GDP numbers are an important indicator of how the economy reacted after demonetisation. In the quarter ended December 31, 2015 the GDP growth was 7.2 per cent.

Meanwhile, Growth of 8 core sector industries slowed to 3.4 per cent in January compared to 5.7 pc in the year-ago month, government data showed on Tuesday.

Intensifying the fight against corruption and black money, PM Modi had outlawed 86 per cent of India's total currency in circulation as part of Rs.500 and Rs.1,000 notes.

Soon after the announcement of note ban, the economists had predicted the GDP growth to go down.

The International Monetary Fund (IMF) in a report last week had predicted that India’s GDP growth will go down due to temporary disruptions caused by the Union government’s demonetisation drive.

“Growth is projected to slow to 6.6 per cent in financial year 2016-17, and then rebound to 7.2 per cent in financial year 2017-18, due to temporary disruptions, primarily to private consumption, caused by cash shortages,” the IMF said.

Meanwhile, the Reserve Bank of India (RBI) on February 17 has lowered the economic growth forecast for the currency fiscal to 6.9 per cent from previously projected 7.1 per cent. However, the RBI has projected the group to bounce back to 7.4 per cent in 2017-18.

The government announced demonetisation or note ban of Rs.500 and Rs.1,000 notes on November 8 midnight to curb black money and terrorism and promote digital transactions.