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Modi govt unveils Rs10-trillion plan to boost economy --- ibps po clerks

Modi govt unveils Rs10-trillion plan to boost economy

The plan, unveiled by finance minister Arun Jaitley, includes spending Rs 2.11 trillion towards pumping capital into banks and another Rs 7 trillion on a roads and highways project.

BUSINESS Updated: Oct 24, 2017 19:43 IST
Moushumi Dasgupta
Finance minister Arun Jaitley during a press conference in New Delhi on Tuesday.
Finance minister Arun Jaitley during a press conference in New Delhi on Tuesday.(Arvind Yadav / HT )
Prime Minister Narendra Modi’s government unlocked nearly Rs10 trillion in investments to recapitalise state-owned banks and build new roads and highways on Tuesday, its biggest move yet to shore up an economy growing at its slowest in three years.
Plans include spending Rs 2.11 trillion towards infusing capital into banks and another Rs 7 trillion on the roads project, some of which will run through economic corridors as well as remote border and coastal areas.
The government also separately announced an increase in the price at which it procures wheat, pulses and oilseeds from farmers. It also waived off the penalty on delayed filing of initial returns on the new Goods and Services Tax (GST) for August and September.
The measures could help improve credit flow to companies from banks weighed down by bad debt as well as boost connectivity and create jobs as the government builds 83,677 km of roads and highways over the next five years.
The spending push, anticipated by many after growth slowed to 5.7% in the June quarter, will also likely help the government blunt political criticism ahead of state polls over the next few months that lead up to the general elections in 2019.
Unveiling the move at an unusually high-octane press conference complete with a power point presentation, finance minister Arun Jaitley said the economy was on a strong wicket and that temporary hiccups were not unusual when structural reforms were undertaken.
“When results of the GDP of the first quarter came out then I had said that we will be ready for the response,” said Jaitley, flanked by half a dozen senior officials of his ministry who gave presentations on the health of the economy.
“We will report on the situation as they develop.”
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But ramping up government spending, at a time when subdued tax collections and sluggish economic growth have strained federal revenues, could widen the fiscal deficit beyond the targeted 3.2% of GDP.
There were already signs that the government had little option but to spend its way out of trouble that was exacerbated, in part, by last year’s shock withdrawal of high-value banknotes as well as disruptions ahead of the rollout of GST.
In August, official data showed fiscal deficit at July-end touched 92.4% of the budget, mainly because of front-loading of state expenditure.
This is also a sign that government spending was buoying up an economy where private investment was scarce. The deficit figure for the same period of 2016-17 was 73.7% of the target.
But rejecting any pessimism over the economy, Jaitley said the government had held several internal meetings and that discussions were also held with Prime Minister Modi.
“India has been fastest growing major economy for the last three years,” he said.
“Attempt is to maintain high growth rate.”
(With input from Alekh Archana in Mumbai for Livemint)

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