New Delhi, Oct 24 (PTI) Seeking to boost note ban andGST-hit economy, Finance Minister Arun Jaitley today announceda massive Rs 6.92 lakh crore infrastructure spending andanother Rs 2.11 lakh crore for bank recapitalisation to reviveinvestments as well as growth.
Flanked by all his five secretaries and Chief EconomicAdvisor, Jaitley reeled out economic indicators to supportgovernment contention that GDP growth slowdown has bottomedout and economy is turning around.
To boost job creation, the government granted enhancedaccess of funds for MSMEs, including by way of customisingMudra loans.
A presentation was made at a briefing titled 'The IndiaStory: Speeding Up For Take Off!' which highlighted that theeconomy grew by 7.5 per cent per annum in the three years ofBJP-rule since 2014.
For last three years India has been fastest growing majoreconomy in the world, Jaitley said. "And our intention is thatthe high growth economy that India has become, we continue tomaintain that position."Economy slowed to 5.7 per cent in the April-June quarterof the current, the weakest pace since 2014 as demonetisationsucked out 86 per cent of the currency in circulation throwingcash-dependent businesses in disarray and the implementationof GST from July 1 hit small and medium enterprises.
"There was a temporary slippage in growth in the last twoquarters thanks to transitional effect of demonetisation (ofold 500 and 1000 rupee notes) and GST," an official statementissued at the briefing said.
That effect, it said, is now over with all indicators -–industrial production, core sector, automobile and consumerspending -- pointing towards "a strong growth pick up". "Thereis expectation of very good growth from second quarter ofcurrent year itself."The Finance Minister said it is natural that whenstructural reforms happen there is some impact for limitedtime. "But medium to long term, there is huge benefit."The Cabinet, headed by Prime Minister Narendra Modi,today approved a Rs 6.92 lakh crore investment in building83,677-km of road over the next five years, which will create14.2 crore mandays of jobs.
With this, the total infrastructure spending cleared bythe government touched Rs 14 lakh crore, Finance SecretaryAshok Lavasa said.
Also, a massive bank recapitalisation programme has beenapproved. Of the Rs 2.11 lakh crore, recapitalisation bondswill account for Rs 1.35 lakh crore and another Rs 76,000crore will come from budgetary support and equity issuance.
Jaitley said the recapitalisation of PSU banks would befollowed by a series of reforms. He, however, did notelaborate.
"When you give such a big push to infrastructure, ithelps in job creation. And job creation is the intention topush private sector investment and MSME funding," he said.
Public sector banks, which remain the main source offunding, have seen NPAs or bad loans swell from Rs 2.78 lakhcrore as of March 2015 to Rs 7.33 lakh crore in June thisyear, primarily because of reclassification of loan,Department of Financial Services Secretary Rajiv Kumar said.
Of that, Rs 1.75 lakh crore relates to just 12 cases whichhave been referred to NCLT.
The recapitalisation besides repairing their balancesheets would help banks meet the Basel III banking rules.
"The net impact of all these is, private investment willbe further strengthened. Infrastructure instantaneouslycreates job, lending to small and medium enterprises createsjob," Jaitley said.
Macro economic fundamentals are strong, he said, addingthat there was a need to increase public spending.
"Infrastructure expenditure is unprecedented in the country.
Efforts are on to increase public expenditure in varioussectors of economy -- rural roads, highways, Bharat Mala,housing, railways."Also, the intention is to increase private investment ineconomy. "It was one area which had its own challenges. So farwe believed that public sector banks have done indiscriminatelending at one stake. Between 2008-2014, because ofindiscriminate lending, a bigger chunk is NPAs," he said.
On reforms that will follow in banking sector, he said,"I'm only indicating that more reforms will happen so as toensure that there is no repetition of the situation that wasthere in 2014 where in you lend indiscriminately while hidingthe real conditions of those loans. Its only after March 2015the actual position of banks became clear."Asked if the bank recapitalisation plan will impactfiscal deficit, he said: "It will depend on the nature ofbonds and the manner in which it is dealt with.
"The money which has been deposited in banks postdemonetisation that is available for lending, but availabilityof money doesn't ensure that it can be lent. For that capitaladequacy is needed. And that capital adequacy was erodedbecause of excessive NPAs and because of situation of banksbetween 2008-2014."Jaitley said the Cabinet decided that a "bold step"should be taken by the government to address this problemthrough Rs 2.11 lakh crore recapitalisation. "This will beaccompanied by a series of banking reforms which you will hearfrom us in the course of next few months.""Of this money, part of money will come from banksraising their own capital where government equity can comedown to 52 per cent," he said. "There is another Rs 18,000crore from budgetary resources which will be put into banksunder Indradhanush. So that makes it a total of Rs 76,000crore."In a presentation made at the briefing, Economic AffairsSecretary S C Garg said inflation has consistently come downsince 2014 and will remain below 4 per cent this fiscal.
Detailing macro-economic fundamentals, he said thatcurrent account deficit will be less than 2 per cent this yearand foreign exchange reserves have crossed USD 400 billion.
On fiscal deficit, he said the government is committed tosticking to the target of 3.2 per cent of GDP for the currentfiscal but a review would be done in December.
Stating that the GDP growth slowdown has bottomed out andthe economy is turning around, he said the InternationalMonetary Fund (IMF) had recently projected that the countrywould achieve a 8 per cent growth rate soon. PTI JD NKD ANZSA.
This is unedited, unformatted feed from the Press Trust of India wire.