Stimulus

In an effort to boost private investments, public banks, caught in a bad loan mess, are likely to be recapitalised with an additional ₹25,000 crore over the budgeted ₹10,000 crore. This money will be generated from divesting government stakes in public banks or by issuing bonds.

The government is working on measures that will create more jobs and help raise income levels but no step impacting its revenue and spending balance will be taken outside the annual budget, finance ministry officials said.

While measures under consideration include those meant to make doing business easier and to attract fresh investments, structural changes in the government’s fiscal discipline will not be takenwithoutParliament’ssanction, an official said.

To boost private participation in construction and infrastructure, the government is re-working the public-private partnership model. A new policy is likely to be announced which will offer different PPP models for different sectors, including the long in-demand clauses on grievance redress along with re-negotiation options.

Gross fixed capital formation, an indicator of capital investment in the economy has grown at only 1.6% in the first quarter of 2017-18, leading to the government to look at ways of inducing the private sector to invest more while looking at hiking its own spending.

“The worry is that investments are happening but its proportion to the GDP is important. GDP is growing at 5.7% while investments are at 1.6%. This means investments are not acting as a demand-enhancer. If we continue this for a long time then it will impact demand. So the government has to work on both the demand side as well as the supply side,” said Pronab Sen, former chief statistician of India.

While growth slipped in the the first three months of the financial year, doubts are being raised over revenue as GST is expected to impact collections. Sources said the government is looking at issuing infrastructure bonds to raise money for spending.

The government also wants to raise its capital expenditure beyond the budgeted ₹3.10 lakh crore but is cautious that it does not breach its fiscal deficit target. The government has already met 92% of its fiscal deficit estimate of ₹5.46 lakh crore for 2017-18.

(With inputs from Mint)