New Delhi: Top bankers advise finance minister Nirmala Sitharaman to fast track infrastructure development by allocating more money in the budget that will incentivize the industry to set up new units, expand capacity to kick-start the economy which is expected to shrink by nearly 8 per cent in the current fiscal.
According to the first advance estimate of the country’s economic growth released by the apex statistics body, the NSO, early this month, India’s economy is expected to contract by 7.7% in the current fiscal that ends in March this year.
This is the first budget of Prime Minister Narendra Modi’s government amid an ongoing Covid-19 global pandemic that devastated lives and livelihoods of millions of people worldwide as the confirmed coronavirus cases have crossed the mark of 100 million with the death of over 2.16 million people worldwide.
In order to deal with the adverse economic impact of the pandemic, finance minister Sitharaman in May last year unveiled an ambitious Rs 20 lakh crore self-reliant India campaign, which primarily facilitated easy credit to the industry to start production.
However, economists and bankers advise against following the same strategy in the upcoming budget of boosting the supply side without stimulating demand.
Budget should kick-start economy: Kannan
“The budget should be about kick-starting the economy and not necessarily asking the bank to lend,” said VG Kannan, former managing director of State Bank of India.
“How do we incentivize the industry, incentivize people to set up new units? We should give them some sort of benefit in terms of tax-relief, incentives in certain locations for capacity enhancement and capacity expansion should be done,” Kannan told the audience in response to a question by ETV Bharat in a programme organised by policy think tank EGROW Foundation.
“We have not seen this in the last three-four years,” Kannan told ETV Bharat.
Inadequate capital expenditure
According to the information given by finance minister Nirmala Sitharaman in this year's budget, the Central government's capital expenditure in FY 2018-19 was Rs 2.94 lakh crore (actual).
According to the revised estimates for FY 2019-20, capital expenditure has been estimated at Rs 3.41 lakh crore and for the current fiscal (FY 2020-21), the capital expenditure has been estimated at Rs 4.02 lakh crore.
The estimate of capital expenditure for the current year is just 13.21% of the total budgeted expenditure for the year, which has been estimated at Rs 30.42 lakh crore but is expected to be lower due to the ongoing Covid-19 pandemic.
Referring to National Infrastructure Pipeline (NIP), which envisions investment of over Rs 100 lakh crore in next five years, Kannan says there is a lot of talk about fast tracking the infrastructure development which has to be further accelerated.
"That has to be super fast-tracked. That is something which could kickstart the economy,” Kannan, who was also Chief Executive of Indian Banking Association, told the audience.
Housing, Infra development crucial: Charan Singh
In an earlier interaction with ETV Bharat, Dr Charan Singh, Chief Executive of EGROW Foundation had said economic growth would come from the infrastructure and housing sector.
“Where does the growth come from? It is going to come from infrastructure and housing. Housing is related to 275 industries. If you go in for a big boost for affordable housing, 275 industries in the country benefit,” Charan Singh told ETV Bharat.
“It has a large multiplier effect, it is labour intensive and it creates multiple jobs for various other industries, cement and steel among the most prominent ones,” he had said.
In a pre-budget with the industry last month, finance minister Nirmala Sitharaman had said that the thrust of the next budget would be on the infrastructure sector and it would lead to increased demand of cement, steel and other related sectors.
(Article by Krishnanand Tripathi)
