Lok Sabha Question No. 2397 (UNSTARRED), answered on 2018-03-09
Subject: Growth Rate
Ministry: FINANCE
Asked by: DIMPLE YADAV, SHIVAJI ADHALRAO PATIL, SHRIKANT EKNATH SHINDE

## Approved by the Hon'ble Mos (Finance)

Government of India Ministry of Finance Department of Economic Affairs

## LOK SABHA

## UNSTARRED QUESTION NO. 2397

TO BE ANSWERED ON MARCH 9, 2018

## GROWTH RATE

† 2397. SHRI DHARMENDRA YADAV: SHRI ADHALRAO PATIL SHIVAJIRAO: DR. SHRIKANT EKNATH SHINDE:

Will the Minister of FINANCE be pleased to state:

- (a) whether the growth rate of the country has now fallen below the average of the past 30 years;
- (b) if so, the details thereof;
- (c) whether exorbitantly high interest rate regime imposed by the Reserve Bank of India (RBI) almost eight years is responsible for all in growth rate;
- (d) if so, the details thereof and the other reasons responsible therefor; and
- (e) the steps taken by the Government to keep market movements orderly and ensure that there is no liquidity problem or rumour or panic induced volatility?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PON. RADHAKRISHNAN)

- (a) & (b) As per the Second Advance estimates released by Central Statistics Office (CSO) the growth of Gross Domestic Product (GDP) is estimated to be 6.6 per cent in 2017-18, which is same as the annual average GDP growth rate during last 30 years, starting from 1987-88 to 2016-17. However, it may be mentioned that the growth rate of GDP from 2012-13 may not be strictly comparable with the growth rate prior to that period.
- (c) & (d) The Reserve Bank of India has reduced the Policy Repo rate by 200 basis points beginning 2015.  The  Monetary  Policy  Committee  (MPC)  in  its  sixth  bi-monthly  monetary  policy  statement  of February 7, 2018 noted that 'the economy is on a recovery path, including early signs of a revival of investment activity. Global demand is improving, which should help strengthen domestic investment activity.  The  focus  of  the  Union  Budget  on  the  rural  and  infrastructure  sectors  is  also  a  welcome development as it would support rural incomes and investment, and in turn provide a further push to aggregate demand and economic activity'. The CSO has revised the GDP growth upwards for 201718 from 6.5 per cent in First Advance Estimates to 6.6 per cent in Second Advance Estimates.
- (e) According to the Reserve Bank of India, there is no shortage of systemic liquidity. As mentioned in the sixth bi-monthly statement 'The liquidity in the system continues to be in surplus mode, but it is

moving steadily towards neutrality. The weighted average call rate (WACR) traded 12 basis points (bps) below the repo rate during December-January as against 15 bps below the repo rate in

November. During the two weeks beginning December 16, 2017, the Reserve Bank injected average daily net liquidity of Rs. 388 billion into the system. For December as a whole, however, the Reserve Bank absorbed Rs. 316 billion (on a net daily average basis). As the system turned into deficit again in the fourth week of January, the Reserve Bank injected average net liquidity of Rs. 145 billion. For January, on the whole, the Reserve Bank absorbed Rs. 353 billion (on a net daily average basis).'

In order to ensure orderly market movement and to curb excessive volatility, SEBI and Stock Exchanges  have  put  in  place  surveillance  mechanism  to  monitor  the  trading  in  stock  exchanges. Further,  SEBI  maintains  constant  vigil  in  the  market,  and  in  case  of  any  abnormality,  takes appropriate action against the concerned entities. The systems and practices are in place to promote a safe, transparent and efficient market and to protect market integrity. The systems instituted include advanced risk management mechanisms comprising continuous monitoring and surveillance, various limits on positions, margin requirements, circuit filters, etc. The systems and practices are reviewed continuously  and  modified  to  meet  emerging  needs.  SEBI  monitors  trading  activities  in  addition  to overseeing the surveillance functioning of the exchanges. Any aberration noted in the trading activity is  examined  by  SEBI.  Additionally,  reports  received  from  exchanges  and  complaints  received  are examined by SEBI. Whenever any violation of SEBI rules and regulations is observed, appropriate action  as  warranted  is  taken  by  SEBI  against  concerned  entities.  SEBI  has  also  been  conducting regular meetings with officials of the stock exchanges and depositories and they have been advised to step up their own surveillance measures and to initiate expeditious demonstrative action wherever warranted  so  as  to  protect  investors'  interest  and  ensure  orderly  functioning  of  the  stock  market. Further,  SEBI,  from  time  to  time,  has  prescribed  various  measures  for  ensuring  orderly  market movements and to curb excessive volatility. In addition, the Stock Exchanges seek clarifications from the listed companies on various price sensitive corporate news items appearing in the media and the same is disseminated to the market on the website of the Exchanges.

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