Lok Sabha Question No. 2694 (UNSTARRED), answered on 2017-03-17
Subject: Impact of Demonetisation on GDP
Ministry: FINANCE
Asked by: NINONG ERING

- (a) the details of the impact of demonetisation of India's Gross Domestic Product (GDP) for the financial year 2016-17 along with growth rate registered, sector-wise including agriculture and allied services, manufacturing and service sector;
- (b) whether the Government is in agreement with the GDP estimates given by various domestic and international agencies including World Bank and International Monetary Fund after demonetisation and if so, the details thereof and if not, the reasons therefor;
- (c) whether the manufacturing units in the country had to reduce the number of shifts and cut back operations after 8 November 2016 due to demonetisation and if so, the details thereof; and
- (d) the corrective steps taken by the Government in this regard?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ARJUN RAM MEGHWAL)

(a): The Gross Domestic Product (GDP) of a country depends on a number of factors including monetary factors (which is partly reflected by demonetisation). Therefore, it is not possible to pinpoint the impact of demonetisation on India's GDP. As per the second advance estimates released by Central Statistics Office on 28 th February  2017, the growth rate of GDP at constant  market  prices  is  estimated  to  be  7.1  per  cent  in  2016-17,  as  against  a  growth  of  7.9  per  cent  in  2015-16.  The agriculture and allied sectors, manufacturing and services sector registered a growth rate of 4.4 per cent, 7.7 per cent and 7.9 per cent respectively in 2016-17, as compared to the corresponding growth rates of 0.8 per cent, 10.6 per cent and 9.8 per cent respectively in 2015-16.

(b):  From  time  to  time,  domestic  and  international  agencies  including  Word  Bank  and  International  Monetary  Fund  (IMF) estimate  the  GDP  according  to  their  own  assessment  and  analysis  of  the  economy.  The  Global  Economic  Prospects published by the World Bank in January 2017, projected the Indian economy to grow at 7.0 per cent in 2016-17. However, the IMF in its World Economic Outlook Update released in January 2017 estimated that India would grow at the rate of 6.6 per cent in 2016-17. As per the results of the survey of professional forecasters, published by the Reserve Bank of India on 8 th February 2017, the real gross value added (GVA) at basic prices is projected to grow by 6.7 per cent in 2016-17 (median value). The Government takes note of these different estimates. The Central Statistics Office of the Government of India has estimated that the growth of GDP at constant market prices would be 7.1 per cent in 2016-17.

(c):  Information regarding reduction in the number of shifts and cutting back of operations by the manufacturing units due to demonetisation, based on any comprehensive survey by the Government, is not available.

(d):  The  Government  of  India  has  taken  various  initiatives  to  boost  the  growth  in  manufacturing  sector  which,  inter  alia, include;  fillip  to  manufacturing  and  infrastructure  and  concrete  measures  for  transport  and  power  sectors  as  well  as  other urban and rural infrastructure. Government has also announced various measures in the Budget 2017-18 to promote growth of  the  economy  which, inter  alia ,  include  push  to  infrastructure  development  by  giving  infrastructure  status  to  affordable housing, higher allocation to highway construction, focus on coastal connectivity and taking up second phase of Solar Park. The  other  growth  promotion  measures  include:  lower  income  tax  for  companies  with  annual  turnover  up  to  Rs  50  crore; allowing carry-forward of MAT credit up to a period of 15 years instead of 10 years at present; further measures to improve the ease of doing business; the proposed scheme for creating employment in the leather and footwear industries; and, a major push  to  digital  economy.  The  Budget  has  also  targeted  to  provide  higher  agricultural  credit  and  to  increase  employment significantly.

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