Need to Increase Public Expenditure: Jaitley on State of Economy
Public investment needs to rise, Jaitley said, adding that steps have been taken to recapitalise banks.
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India has been the world’s fastest growing economy for the last three years and the government is working to sustain a high growth rate, Finance Minister Arun Jaitley said on Tuesday.
Jaitley made the comments at a press conference at the National Media Centre, where he was accompanied by Department of Economic Affairs Secretary SC Garg and Finance Secretary Ashok Lavasa, among others. The cabinet has approved a PSU bank recapitalisation plan of Rs 2.11 lakh crore, the finance ministry announced.
Stay tuned for live updates:
- Finance Ministry announces the Bharat Mala project, under which 34,800 km of roads will be constructed
- The real GDP growth average has been 7.5% in the last three years: Secretary, DEA
- Lashing out at the UPA government, Jaitley said that between 2008 & 2013, public sector banks engaged in indiscriminate lending, while NPAs were brushed under the carpet.
- Defending big reforms, Finance Ministry officials said GST led to reduction in corruption while note ban gave public sector banks adequate lending capacity
- Public investment needs to rise, Jaitley says, adding that steps will be taken to recapitalise banks
'Public Expenditure Needs to Be Stepped Up'
Following the presentations, Finance Minister Arun Jaitley said public sector banks have adequate lending capacity post demonetisation. He added that public expenditure needs to be stepped up:
Watch the Press Conference Here
Govt Approves Capitalisation Plans for Public Sector Banks
The government has announced infusing Rs 2.11 lakh crore to strengthen public sector banks, through a mix of recapitalisation bonds, budgetary support and market raising, said banking secretary Rajiv Kumar.
Part of the money will be from banks raising their own capital, where the government can reduce their stake to 52 percent, said Arun Jaitley, who called it a “bold move”. The infusion will be front-loaded through recapitalisation bonds, whose nature will be decided in due course, Jaitley added.
Strengthening the country's banking system will result in more jobs, growth and investments, Kumar added. Banks are ready for a take-off due to strong economic fundamentals and push to public investment in infrastructure, he added.
In three and a half years, the government has already infused Rs 58,848 crore in PSBs under the Indradhanush plan. This is compared to Rs 62,734 crore infused in the six years to 2014, Garg said.
The government's recapitalisation plan is "why banks have mostly remained Basel-III compliant," he added.
Affordable Housing Plans Announced
Cabinet Approves Rs 5.35 Lakh Crore Highway Plan
The cabinet has approved the construction of 34,800 kilometres of roads under its BharatMala plan, said Finance Secretary Ashok Lavasa. The government will invest Rs 5.35 lakh crore towards the plans. As per the Finance Secretary's proposal, displayed on a powerpoint presentation, the project will connect economic corridors across the country to unlock their potential.
The plan also involves developing border roads so as to “enhance national security”. Development of coastal roads will improve port connectivity, Lavasa added.
A Presentation of India's Economy
The Finance Minister said the government recognises that India has strong economic fundamentals, and has set goals for areas where it can be boosted.
The finance ministry made use of a slideshow to discuss the current state of the economy, and to draw comparisons with the previous years.
"The government is convinced that the gross domestic product growth has bottomed out," Garg said.
He added that the second quarter GDP numbers will convince everyone that India is back on a “strong growth path”.
Finance Secretary, Ashok Lavasa, said that effective and targeted government spending is priority.
FM Jaitley to Make Major Announcement
Finance Minister Arun Jaitley is likely to make a major announcement on Tuesday evening at a press conference in the National Capital.
Earlier in the day, Jaitley had tweeted, saying:
Further details are awaited.
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