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NEW DELHI (Reuters) - India's economy is expected to recover in the current quarter as the pain stemming from Prime Minister Narendra Modi's cash clampdown late last year has ended, a top policy adviser of the government said on Friday.
Niti Aayog Vice-Chairman Arvind Panagariya's comments came days after data showed that India's annual economic growth rate unexpectedly slowed to 6.1 percent in the January-March quarter, its lowest in more than two years.
Modi's shock decision last November to outlaw high value banknotes took 86 percent of currency out of circulation virtually overnight, pounding consumer demand in the cash-reliant economy.
While Asia's third-largest economy surprised investors with its resilience in the October-December quarter when the cash crunch was at its peak, its lingering impact saw construction activity contract and manufacturing and private services slow in the latest quarter.
Panagariya, vice-chairman of the government's main economic advisory body, said an improvement in cash supply should lift overall economic activity in the April-June quarter.
"We are pretty much out of the woods as far as demonetisation is concerned," he told a news conference. "We should see a good turnaround in Q1."
The former Columbia University economics professor also said growth in the fiscal year to March 2018 would accelerate to 7.5 percent, faster than 7.1 percent a year ago, and would top the 8 percent mark in 2018/19.
"Before the present term of the government ends, I would expect that we would hit the 8 percent mark and probably enter another trajectory of sustained growth at 8 percent plus," he said. Modi's five-year term ends in May 2019.
Reporting by Sudarshan Varadhan; Writing by Rajesh Kumar Singh; Editing by Douglas Busvine & Shri Navaratnam