Lok Sabha Question No. 2190 (UNSTARRED), answered on 2016-07-29
Subject: GDP Growth
Ministry: FINANCE
Asked by: MUTHAMSETTI SRINIVASA RAO (AVNTHI)

- (a) whether the Government is aware of the observation made by the Moody's Investors Service that India's GDP growth over the next two years will be challenged by lacklustre global demand and high leverage levels in some corporate sectors;
- (b)  if so, the details thereof and the reaction of the Government thereto; and
- (c)  the corrective steps the Government is taking to deal with situation?

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

(a)  &  (b):  Moody's  Investors  Service  has  observed  that  India's  GDP  growth  over  the next two years would be challenged by lacklustre global demand and high leverage in some corporate sectors.  However, the Moody's report has also observed that India's medium-term  potential  would  be  supported  by  the  gradual  implementation  of  further targeted policy reforms, improving the business environment, state of infrastructure and productivity growth. They have also mentioned that the effect of the United Kingdom's majority vote to leave the European Union on India's financial markets would be limited and that  India  is  not  significantly  exposed  to  a  potential  sharp  fall  in  capital  flows  to emerging markets.

From  time  to  time,  research  organizations  and  international  organizations  and  rating agencies do bring out their analysis of India's growth prospects which Government of India  takes  note  of,  and,  useful  recommendations,  if  any,  are  used  as  policy  inputs. Despite the unfavorable global demand conditions that led to a sharp decline in India's exports, and, the presence of stressed corporate debt in certain sectors, growth of the Indian economy accelerated from 7.2 per cent in 2014-15 to 7.6 per cent in 2015-16 on the  strength  of  India's  domestic  demand.  The  focus  of  the  Government  on  growthpromoting economic reforms and its commitment to improve the ease of doing business and  investment  is  likely  to  combat  the  adverse  spillovers  from  global  slowdown  and other domestic constraints. The fact that the Gross Foreign Direct Investment inflows were the highest at US Dollar 55.5 billion in 2015-16 indicates positive global investor sentiments towards the Indian economy. In 2016-17, the data available for April-May indicates a continuance of robust inflows.

(c):    The  Government of India has taken various initiatives to boost the growth of the economy  which, inter  alia ,  include;  fillip  to  manufacturing  and  infrastructure  through fiscal incentives and concrete measures for transport, power, and other urban and rural infrastructure;  substantive  reforms  and  liberalization  of  foreign  direct  investment  in major sectors; measures to debottleneck the supply of key raw materials; Skill India and Digital  India  initiatives;  'Make  in  India'  initiative  along  with  the  attendant  facilitatory measures for a more conducive environment for investment; and, the new insolvency and  bankruptcy  related  legislation.  Measures  like  the  Start-up  India Initiative  to  boost entrepreneurship and creation of jobs; 'Stand Up  India  Scheme'  to  promote entrepreneurship among SC/ST and women entrepreneurs; boost to agricultural sector with  focus  on  micro  irrigation,  watershed  development,  soil  conservation  and  credit; and, various measures to improve clarity and transparency in economic policy-making; are also likely to promote growth.

In order to deal with the problem of stressed corporate debt, the Government has taken specific measures to address issues in sectors such as power, roads, steel and textiles. The  Government  has  also  approved  the  establishment  of  six  new  Debt  Recovery Tribunals to speed up the recovery of  bad loans of the banking sector. RBI has also undertaken  steps  which  include:  formation  of  Joint  Lenders'  Forum  for  revitalizing stressed  assets  in  the  system;  Flexible  Structuring  for  long  term  project  loans  to infrastructure  and  core  industries;  and,  Strategic  Debt  Restructuring  scheme.  The Government has recently issued advisory to banks to take action against guarantors in the event of default by borrowers, under sections of relevant Acts.

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