Some decisions are deemed so good that the government wants to announce them twice or even thrice with breathless delight.
Tuesday's Rs 102 lakh crore bonanza for infrastructure till FY25 is one such example. It was first announced by Prime Minister Narendra Modi and reiterated by Finance Minister Nirmala Sitharaman from time to time and markets have salivated over it all too well.
Yet, coming on the eve of New Year, the move certainly gives everyone a thrill. But if you look closely, the spending binge isn't truly a custom-made kickstart-the-economy package.
Every year, the Centre and states spend over Rs 10 lakh crore to build infrastructure like roads and ports. For instance, in FY18 and FY19, Rs 20.2 lakh crore was spent towards capital expenditure.
So, effectively the proposed Rs 102 lakh crore is a sum stretching for five years and what stands out though is, in FY21, the expense is projected to shoot up a massive 43 per cent over FY20. Given the precarious tax revenues, it'll be interesting to see if the government will feast on debt, upsetting deficit scolds including the IMF.
Agreed, the earmarked $1.4 trillion is much more than the $1.1 trillion we've spent in the past ten years, but it's nothing unusual for a growing economy like India, which has an appetite to finance even larger projects. Ask China, which spent trillions on infrastructure, most of which wasn't even needed, to avoid an economic slowdown during the 2008 global financial crisis.
While the Centre has been projecting the proposed Rs 102 lakh crore as part of its grand fiscal stimulus plan, it isn't the only one doing the heavy lifting. That task is equally left to the states, which are struggling due to delayed payouts and their own depleting revenue resources.
Typically, the Centre, states and private sector are fellow travellers in the infrastructure development journey. Of the total $1.4 trillion, the Centre's share is 39 per cent at Rs 38.85 lakh crore, while an equal sum will be borne by the states. The private sector, which is currently deleveraging as part of the healing process, is expected to pump roughly about Rs 21 lakh crore, but whether they can shoehorn this extra bite remains unclear.
As if poking on a sore spot, the private sector is also tasked with full responsibility to invest and implement Rs 9.3 lakh crore worth renewable energy projects. Their lack of appetite is evident from the fact that just 3 per cent of the projects are under implementation currently. For comparison, 42 per cent of the total Rs 102 lakh crore is under implementation as of now.
One notable distinction, however, is the creation of the National Infrastructure Pipeline, which will monitor and guide all infra projects under construction, and proposed greenfield and brownfield projects under one roof. It will resolve some of the long-standing issues including delayed permissions, land acquisition and others. According to Manju Yagnik, Vice Chairperson Nahar Group, the pan-India single-window clearance will ensure quick permissions and ensure effective development.
To sum up, the prevailing slowdown is shifting the national mood from grief to 'existential angst,' and it's the government's job to instil optimism, if not pump piles of cash to revive demand. Why? Because, as RBI Governor Shaktikanta Das rightly pointed out in the past, "The mood of doom and gloom isn't going to help anyone." Not banks, not businesses and certainly not the real economy.
And as he concluded, "It's the sentiment, it's the mood, which is very important." Which is precisely what Tuesday's Rs 102-lakh crore announcement is attempting to do.