Lok Sabha Question No. 2280 (UNSTARRED), answered on 2016-05-06
Subject: Crisis in China
Ministry: FINANCE
Asked by: BHARTRUHARI MAHTAB, SANJAY SHAMRAO DHOTRE

- (a)  whether the Government has made an assessment of the recent crisis in China and its possible impact on the Indian economy;
- (b)  if so, the details thereof and the sectors/areas of the economy likely to be affected; and
- (c)  (c)  the  steps  taken  by  the  Government  to  protect  and  boost  the  Indian  economy  and  to  maintain  the credibility of Foreign Institutional Investors (FIIs)?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI JAYANT SINHA)

(a) & (b): The impact of global developments, including developments in China, can be assessed through trade, commodity prices and financial channels. The slowdown in China has  contributed to the sharp decline in the global prices of commodities like steel, other metals, crude oil, etc., and India, being the major importer of oil and other minerals, has benefited from softer oil and commodity prices. While Indian exports have slowed, imports have also slowed considerably on account of global commodity prices declining significantly. In  the context of the slowdown and rebalancing in China, the World Economic Outlook of the International Monetary Fund (April 2016)  indicated  that  economic  activity  in  some  Asian  advanced  economies  closely  integrated  with  China weakened sharply during the first half of 2015, owing in part to steep decline in exports. However, as per the advance estimates of the Central Statistics Office, India's growth rate is estimated to have picked up from 7.2 per cent in 2014-15 to 7.6 per cent in 2015-16.

(c):  The  Government  of  India  has  taken  various  steps  to  boost  the  growth  of  the  economy  which, inter  alia , include;  administrative  and  regulatory  measures  to  accelerate  growth  in  manufacturing  sector;  initiatives  for industrial corridor development; Make in India initiative along with the attendant facilitatory measures intended to create a more conducive environment for investment; and, Skill India initiative. Start-up India initiative has been launched to boost entrepreneurship and creation of jobs. Micro Units Development and Refinance Agency Ltd and 'Stand Up India' schemes have also been launched to promote entrepreneurship, the latter focussing on SC/ST and women entrepreneurs. The Budget 2016-17 continued the Government's growth-promoting agenda with measures aimed at: improving agricultural growth and infrastructure; time-bound plans for rural electrification and connectivity; boost to manufacturing with rationalization of customs and excise duties; liberalized FDI policy in  various  sectors;  and  improved  ease  of  doing  business  for  start-ups.  Improved  growth  and  macroeconomic stability is likely to improve the confidence of Foreign Institutional Investors. Government has also taken various steps to protect the domestic economy that, inter alia ,  include:  raising  basic  customs  duty  on  specified  items; and, measures to streamline and increase availability of raw materials like coal.

The  Security  and  Exchange  Board  of  India  (SEBI)  maintains  constant  vigil  on  the  market  with  measures including:  continuous  monitoring  and  surveillance,  various  limits  on  positions,  margin  requirements,  etc.  The systems  and  practices  are  reviewed  continuously  and  modified  to  meet  emerging  needs.  The  new  Foreign Portfolio  Investment  (FPI)  Regulations  that  came  into  effect  from  1 st June  2014  have  adopted  a  risk-based approach towards customer identity verification of FPIs.