‘Centre will ensure capex FM may nudge heads of aid for economic growth’ PSBs to boost loan growth
MUMBAI: The government is committed to ensure that capital expenditure will continue to support the economic growth momentum regained after the third Covid-19 wave, chief economic advisor V Anantha Nageswaran said on Friday.
The government has taken various steps—including lowering taxes, the continuation of privatisation, setting up institutions for sequestering bad loans and managing them and launching an asset monetisation drive— to strengthen the real economy, he added.
“Given the ongoing sense of uncertainty among the private sector participants, both in banking and the non-banking world, the government is committed to making sure that capital expenditure continues (in) such ( a way) that growth impulse that we have regained after the third wave is not surrendered,” he said while speaking at a banking event organised by Financial Express.
In the previous fiscal, while the capital expenditure was budgeted at ₹6 lakh crore, the government managed to spend ₹5.92 lakh crore. “And hence, for the current fiscal year, if the government is able to execute the capital expenditure of ₹7.5 lakh crore, then that is the biggest real economic intervention,” he said.
When asked about what other measures should be initiated to help the real economy, Nageswaran said the government will keep its eyes and ears open to respond to whatever the situation arises but all the steps will be well measured.
He said any intervention in the economy has a fiscal component to it, which in turn, will have an impact on interest rates, CAD and currency. “We need to be aware of actions having consequences and whether consequences will complicate the situation or not. So, we need to be careful when we intervene. Are we going to make the situation worse or better?”
Accordingly, every step has to be thought through in terms of the second and third- order effects. So, that is why whatever we do going forward has to be measured and calibrated,” he said.
The CEA further said among all other nations, India is better placed with respect to its midpoints in terms of the inflation outlook. Even on the growth outlook, the country is better than others. He said the fact that the country is now very concerned about a 7% inflation rate is a good sign.
NEW DELHI: Finance minister Nirmala Sitharaman is scheduled to meet heads of public sector banks (PSBs) on Monday to review performance of the lenders and progress made by them on various schemes launched by the government for revival of the economy.
This is the first review meeting after the presentation of Budget 2022-23.
Banks would be urged to sanction loans for productive sectors to accelerate revival of the economy facing headwinds including from Russia-Ukraine war, people close to the matter said.
Last week during the Iconic Week celebration of the finance ministry, banks conducted outreach programme across the country where eligible borrowers were sanctioned loans on the spot. The finance minister would take a stock of credit growth, asset quality and business growth plan of banks, the people said.
They said there would be a comprehensive review of various segments and progress in government schemes including Kisan Credit Card, Emergency Credit Line Guarantee Scheme (ECLGS). In the Budget, ECLGS was extended by a year till March 2023. Further, the guarantee cover for the scheme was expanded by ₹50,000 crore to ₹5 lakh crore.
The coverage, scope and extent of benefits under ECLGS 3.0 pertaining to hospitality, travel, tourism and civil aviation sectors were expanded.
Also, the credit limit for eligible borrowers was increased to 50% of their fund-based credit outstanding from 40% earlier.
The enhanced limit is subject to a maximum of ₹200 crore per borrower. Besides, the people said, review of capital requirement of banks and financial inclusion drive would be reviewed during the meeting.
It is to be noted that the meeting is being held against the backdrop when all PSBs posted profit in the second financial year in a row. They have more than doubled their net profit to ₹66,539 crore during 2021-22.
The collective profit of 12 state-owned banks together was ₹31,820 crore in FY21. However, there were collective losses for five straight years during 2015-16 to 2019-20. The highest amount of net loss was registered in 2017-18 at ₹85,370 crore, followed by ₹ 66,636 crore in 2018-19; ₹25,941 crore in 2019-20; ₹17,993 crore in 2015-16; and ₹11,389 crore in 2016-17.