The Centre will maintain its accelerated tempo in public investment as the Indian economy battles a global slowdown to achieve higher growth, finance minister Arun Jaitley said on Tuesday.
“Public investment has been stepped up in the last year and it will continue to remain stepped up… When you fight a global slowdown, public investment has to lead the way,” Jaitley said at an infrastructure development seminar. In sharp contrast to the boom years, the Indian economy now is powered by government investment and private consumption. Keeping in view the weak private investment, the government budgeted a 29% increase in capital expenditure for FY16 at Rs 2.41 lakh crore. During April-November of the current fiscal, the Centre’s capital expenditure was Rs 1.59 lakh crore, which was 66% of the Budget estimate (it was 54% of the budget target in the year-ago period).
With corporate balance sheets remain highly stressed and only expected to recover slowly, private investment in FY17 will not be significantly greater than in FY16, according to the finance ministry’s Mid-Year Economic Analysis report. As the country’s infrastructure does not match its growth ambitions, economists in the finance ministry said public investment may need to be preserved and even accelerated in order to fill in for and indeed crowd-in private investment in FY17. With domestic demand tepid and exports growth rate shrunk, they revised downwards their estimate of the real economic expansion for the current fiscal to 7-7.5% from 8.1-8.5% forecast in February.
To shore up infrastructure funding, Jaitley said the National Investment and Infrastructure Fund with an initial corpus of Rs 40,000 crore would play a catalytic role in the financing of infrastructure projects. Several sovereign funds and pension funds from Russia, Singapore, the UK and the UAE are willing to participate in the NIIF, in which the government stake won’t exceed 49%.