Lok Sabha Question No. 147 (UNSTARRED), answered on 2018-02-02
Subject: Effect of Demonetisation on Economy
Ministry: FINANCE
Asked by: ASADUDDIN OWAISI

## Government of India Ministry of Finance Department of Economic Affairs

## LOK SABHA UNSTARRED QUESTION NO. 147

TO BE ANSWERED ON FEBRUARY 2, 2018

## EFFECT OF DEMONETISATION ON ECONOMY

## 147. SHRI ASADUDDIN OWAISI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has noted that Indian economy has slowed down sharply in the last quarter of 2016-17 from 7 per cent to 6.1 per and overall growth of three years low to 7.1 per cent;
- (b) if so, the details thereof and the reasons therefor;
- (c) the extent to which demonetisation is responsible for this slow down of economy especially in the last quarter of last financial year; and
- (d) the other reasons for this slow down and steps taken or being taken by the Government to increase the GDP growth in the current financial year?

## ANSWER

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

- (a)  &  (b)  As  per  information  available  from  Central  Statistics  Office  (CSO),  the  growth  of  Gross  Domestic Product (GDP) at constant (2011-12) market prices was 6.1 per cent in fourth quarter (Q4) of 2016-17, lower than 7.0 per cent in third quarter (Q3) of 2016-17. Growth rate of agriculture, industry and services sectors was 6.9 per cent, 6.2 per cent and 6.9 per cent respectively in Q3 and 5.2 per cent, 3.1 per cent and 7.2 per cent respectively in Q4 of 2016-17. As per information available from the First Revised Estimates of National Income, Consumption Expenditure, savings and capital Formation for 2016-17 released by CSO on 31/01/2018, the real GDP growth for 2016-17 is estimated to be 7.1 per cent and growth rate of agriculture, industry and services sector was6.3per cent, 6.8 per cent and 7.5 per cent respectively in 2016-17. The lower growth in 2016-17 was on account of lower growth in manufacturing, construction and services excluding public administration, defence & other services sector; whereas the agriculture sector registered a robust growth on back of normal monsoon.

(c) & (d) GDP growth of a country depends on a number of factors viz. structural, external, fiscal and monetary (which  is  only  partly  reflected  by  demonetisation)  factors,  hence  it  is  difficult  to  pinpoint  the  impact  of demonetisation  on  slowdown  of  the  economy.Economic  Survey  2017-18  indicates  that  the  lower  industrial growth could be account of slow credit growth or probably due to problem of non-performing assets that might have led the  banks to be more cautious on lending.The Government of India has taken various initiatives to boost  the  growth  of  the  economy  which,  inter-alia,  include;  fillip  to  manufacturing,  concrete  measures  for transport  and  power  sectors  as  well  as  other  urban  and  rural  infrastructure,  comprehensive  reforms  in  the foreign  direct  investment  policy  and  special  package  for  textile  industry.  Government  had  also  announced various measures in the budget 2017-18 to promote growth in the economy which, among others, include push to infrastructure development by giving infrastructure status to affordable housing, higher allocation to highway construction, and focus on coastal connectivity. For highways development the Bharatmala Pariyojana has been launched. The government has launched a phased program for bank recapitalization. This entails infusion of capital to the public sector banks that is expected to encourage banks to enhance lending. The Insolvency and Bankruptcy  Code  was  enacted  to  achieve  insolvency  resolution  in  a  time  bound  manner.  To  implement  the Code,  the  National  Company  Law  Tribunal  was  established.  The  other  growth  promotion  measures  include: lower income tax for companies with annual turnover up to Rs 50 crore; further measures to improve the ease of doing  business; and,  a major push to digital economy. The  introduction  of the  Goods and  Services Tax has provided  a  significant  opportunity  to  improve  growth  momentum  by  reducing  barriers  to  trade,  business  and related economic activities.