The government sought Parliament's approval on Friday to increase the FY16 budget spending by about Rs 25,500 crore...
The government sought Parliament’s approval on Friday to increase the FY16 budget spending by about Rs 25,500 crore, half of which would be used to infuse extra capital into public sector banks (PSBs) stressed with bad loans.
In addition to Rs 7,940 crore allocated in the budget in February, the banks would get extra Rs 12,010 crore capital after the supplementary demand for grants gets approved.
The finance ministry worked out the additional capitalisation plan for the current year as high level of bad loans in the PSBs was hurting credit growth, aggravating an already subdued investment sentiment. The PSBs, which account for more than 70% of loan assets in the banking system, had also made representations to the ministry for urgent capital infusion to meet Basel III regulatory requirements and growth needs.
The government is also seeking to infuse Rs 800 crore as equity in the loss-making national carrier, Air India.
In the first supplementary demand for grants for FY16, the government sought approval to spend a gross amount of Rs 40,821 crore, out of which net outgo would be Rs 25,495 crore. The balance Rs 15,325 crore would be met mostly through savings. In February, the government had set total spending for FY16 at Rs 17.77 lakh crore, up 8% year-on-year.While the additional spending might put pressure on the government finances, the positive thing was that a higher-than-usual part of this would go towards plan spending. Plan spending, especially asset creating spending, has a positive spin-off on the economy.
Junior finance minister Jayant Sinha said higher tax collections and savings from the fall in international crude oil prices has put the government in a comfortable position to meet the FY16 deficit target of 3.9% of GDP.
Among others, the government sought extra spending for National Highways Authority (Rs 4,500 crore), wage payment under MGNREGA (Rs 7,000 crore) and implementation of National Food Security Act (Rs 4,435 crore).