By TLI staff
After days of strong buzz that Modi government will bring stimulus package to restart the engines of economic growth that have been stuttering for the last five quarters, Finance Minister Nirmala Sitharaman on Friday announced measures to boost economy but most of them are mere reiteration of the decisions either already taken or course correction.
The major action steps among 32 listed out by her is removal of surcharge on income of super-rich and the other being recapitalisation of public sector banks to give them firepower to lend. While the roll-back of surcharge is moving back to pre-Budget status, the other seeks to provide Rs 70,000 crore to PSBs in one go instead of multiple installments.
The roll-back of surcharge would have a marginal impact on government’s revenue as it will only forego Rs 1,400 crore in the current fiscal, a fraction of total direct tax collection. So, it will leave money only to this extent in the hands of foreign and domestic investors but government expects it to boost overall sentiment! The impact of bank recapitalisation would also be limited as almost five months of the financial year have already gone and the funds have to be anyway infused in the remaining period.
Most of the other announcements are just a compilation of decisions made in the past few months. None of them helped the economy much. It is hence no wonder that government is hiding behind big headlines. Take the case of Rs 100 lakh crore investment in the infrastructure sector over the next few years. The figure is so humongous that if implemented it will turn India into Japan. Going by the project cost of bullet train between Ahmedabad and Mumbai, the Rs 100 lakh crore fund could lay 100 such bullet lines in the country. It’s anybody’s guess if that will ever happen. India will remain India and Japan will remain Japan but there is no harm in dreaming.
Had the Rs 100 lakh crore investment possible over the next 5 years, government would have given detailed plan as to how much of it would come private sector and what would be the share of government. There is barely any significant investment in key infrastructure sectors — highways and railways from the private sector and going by the experts the situation is unlikely to change in the next 18 months.
As per budget documents, the Modi government had a total outlay of about Rs 19.3 lakh crore on infrastructure from FY15 to FY19. The projected figure of Rs 100 lakh crore in the next five years means Rs 20 lakh crore every year or what it spent in the first five years of its tenure. Going by the state of economy, revenue collection trend and lukewarm private sector interest, the Rs 100 lakh crore seems more a headline-grabbing statement than anything else.
The Modi government had first promised to invest Rs 100 lakh crore on infrastructure in its election manifesto in April this year. While announcing the measures to boost economy, Sitharaman had this week said that an inter-ministerial task force would be set up to finalise the pipeline for infrastructure projects but did not say what would be government’s share in the promised investment.
Most other steps announced by the Minister are administrative in nature and aimed at bringing in efficiency. Given the way system functions, their actual implementation on ground would only decide the intended impact. In the last several months, RBI and government have been pushing banks to pass on the benefits of lower repo rate to consumers but have mostly fallen on their deaf ears. Should the system move as it generally does, the much talked about transformation would only remain a pipe dream.