NEW DELHI: Prime Minister Narendra Modi’s key economic advisors have proposed an investment-led stimulus by the government to help revive the economy. The proposed massive spending on infrastructure, along with an upgrade of urban facilities, is expected to create durable assets and jobs, and generate demand for cement and steel.
While NITI Aayog, the Economic Advisory Council (EAC) to the PM and the chief economic advisor had made detailed presentations to Modi on Thursday, the finance ministry presented its assessment of the economy and suggestions for scripting an economic turnaround.
Some of the advisors suggested that the government should not be bogged down by “unreasonable” fiscal deficit targets, given the unprecedented crisis as the priority is to revive growth, especially when money is lying idle with the private sector unlikely to lead investment, sources told TOI.
While asset monetization and speedy disinvestment can help reduce the gap and boost spending, the need to focus on higher expenditure as the way out of the current economic situation is being recognized. The focus should also be on projects which can deliver results in one or two years under the Atmanirbhar Bharat drive.
Officials argued that the Rs 20 lakh Atmanirbhar Bharat package, which saw only around 1% higher government spending, had met the results as the economy was not ready to deal with greater spending on infrastructure creation at that time.
Most economists have estimated a 5% contraction during the first quarter, with even the government and RBI not ruling out lower economic output during the entire financial year — which will be a first in over four decades.
While the EAC to PM headed by Bibek Debroy was split on how to get the economy back on track, the NITI Aayog has suggested that the government could significantly step up investments in railways, ports, airports, logistics and connecting state capitals through a more extensive road network.
The presentation by chief economic adviser KV Subramanian and principal economic adviser Sanjeev Sanyal dentified urbanization as a focus area, while providing an assessment of the macro-economic situation, sources said.
A key theme, including in the finance ministry’s assessment, is to channelize resources in areas which provide quick results. While the Rs 100 lakh crore National Infrastructure Pipeline will prove the much-needed impetus to productive asset creation, some of the projects are seen to be long-gestation and may take years to implement.
Government sources said that projects also need to be implemented quickly unlike those such as the Dedicated Freight Corridor, which has been under-construction for years and is running behind schedule. “It has to be a government spending led revival,” said a source.
There is also a recognition that deficit monetization, which actually means the Reserve Bank of India printing money, should be an option to fund the massive infrastructure push. An aggressive push for privatization of state-run companies has also been suggested as a means to ramp up funds and get rid of inefficiencies in public sector enterprises. A final decision on the shape and actual contours of the package will be taken by the PM, sources said.