New Delhi, Oct 24 (IANS) In a stimulus package to boost the flagging economic growth, create jobs and increase credit flow, the cabinet on Tuesday approved a recapitalisation plan for state-run banks to the tune of Rs 2.11 lakh crore and a massive road infrastructure investment costing nearly Rs 7 lakh crore over the next five years.
Of the support to banks, a sum of Rs 1.35 lakh crore will be raised through recapitalisation bonds and the rest through budgetary support as well as market borrowings, Financial Services Secretary Rajiv Kumar disclosed at a media conference in the presence of Finance Minister Arun Jaitley and a battery of secretaries from the ministry.
Under the road connectivity programme at a cost of nearly Rs 7 lakh crore, the government will construct 84,000 km highways in the next 5 years. Of this, the Bharatmala project component will involve an outlay Rs 5.35 lakh crore that will generate 14.2 crore man-days of work.
Funding for the programme will be raised as debt from the market (Rs 2.09 lakh crore), private investments through PPP (Rs 1.06 lakh crore) and from accruals to the central road fund and toll collections (Rs 2.19 lakh crore).
Jaitley said that the economic blueprint to revive growth being presented follows extensive recent discussions on the state of the economy.
“You will recall the press conference last time, where I had mentioned that we will respond appropriately to the situation as it develops,” he said.
“We have conducted analysis within the ministry and held detailed consultation with Prime Minister on the state of the economy. We have decided on the steps needed to sustain the growth momentum,” he said.
“The unprecedented recapitalisation and the initiatives announced today (Tuesday) are expected to have a noticeable impact in the near term, contributing to accelerated economic activity, employment and growth of the economy,” he added.
The public sector banks’ recapitalisation comes in a context where their non-performing assets (NPAs), or bad loans, have reached the level of 82 per cent of their stressed assets, Kumar said.
“The NPAs of government owned banks have increased to the level of Rs 4.55 lakh crore between 2015 and 2017,” he said.
“Of this, 12 cases, which have been referred to the NCLT (National Company Law Tribunal) account for Rs 1.75 lakh crore, or 25 per cent of all NPAs,” he added.
Pointing out that the accumulated NPA figures reflect the result of “aggressive lending” in the past, Jaitley said the government’s move to fund banks comes at a time when private sector investment has dwindled.
Chief Economic Advisor Arvind Subranmanian, who was also present at the briefing, clarified that the recapitalisation bonds would count as debt, while their exact nature would be made available in due course.
The government, however, denied that this support to banks would affect fiscal consolidation.
The Finance Minister said the banks would get Rs 18,000 crore under the Indradhanush plan.
Under the Indradhanush roadmap introduced in 2015, the government had announced infusion of Rs 70,000 crore in state-run banks over four years to meet their capital requirement in line with global banking risk norms, known as Basel-III.
In line with the plan, public sector banks were given Rs 25,000 crore in 2015-16, and a similar amount has been earmarked for the following years. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.
This stimulus package comes after data from various sources showed India’s GDP growth flagging under the twin impact of demonetisation and GST.
The IMF said in its latest World Economic Outlook that India’s economic growth for 2017 and 2018 will be slower than earlier projections. The report cited the “lingering impact” of demonetisation and the Goods and Services Tax (GST) for the expected slowdown during the current and the next year.
The IMF projected India to grow at 6.7 per cent in 2017 and 7.4 per cent in 2018, which are 0.5 and 0.3 percentage points less than the projections earlier this year, respectively.