Modi Govt Resorts to Massive Capital Infusion of Rs 2.11 lakh crore into the Economy

By Sarkaritel October 25, 2017 10:25

By TN Ashok

New, Delhi Oct: With the countdown starting on the Ahmadabad elections and country faced with jobless growth, the Modi government today switched into battle gear announcing an massive unprecedented Rs 2.11 lakh crore capital infusion into the economy to boost GDP growth and create employment opportunities by kick starting the manufacturing process.

Soon after a emergency cabinet meeting presided over by the Prime Minister Narendra Modi, the government made an elaborate presentation on the capital infusion scheme and a step by step process by which it was sought to be achieved by the secretary Rajiv Kumar in the department of financial services (dfs) at press conference at the National Media Centre in the capital.

Giving the breakup, FM Jaitley said a sum of Rs 1.35 lakh crore would come through floatation of recapitalisation bonds that would increase the liquidity in the economy. Another Rs 76,000 crore would come though capital being raised in the market and infusion of capital into banks. Government had already announced an indradanush scheme in 2015 to expand the capital base of psu banks and a sume of Rs 18,000 crore would form part of this capital infusion, jaitley said.

While accepting the fact that banks were flush with money, Jaitley said it did not automatically mean that they had the capacity to lend which had been vastly eroded between 2003 to 2011 by the previous UPA government by allowing banks to resort to indiscriminate lending which contributed to their their massive nonperforming assets (NPAs). “ The UPA had virtually brushed the NPAS or hidden them under the carpet”, he alleged.

“ The capital infusion will take place over a period of two years in FY 2017-18 and 2018-19. Also a series of banking reforms would be undertaken by the government over this period and we cannot announce now what the reforms would exactly be”, he said.

Government had resorted to such massive public expenditure to boost the infrastructure sector which was the only hope to boost growth, which had slid to 5.7% in Q! Of FY 2017-18, from 7.9% of FY 2014-15, and create massive job opportunities. “The massive capital infusion will not affect either the fiscal deficit or raise inflation “, he said dispelling fears that they would soon go up.

All the top officials of the finance ministry headed by the Finance Secretary Ashok Lavasa and Revenue Secretary Hasmukh Adia and CEA Dr ARvind Subramanian were present at the crowded press conference.