PM Narendra Modi chairs meeting to revive economy

As criticism mounts against the government's skewed fiscal package to handle the Covid-ravaged economy, Prime Minister Narendra Modi is presiding over a two-day discussion beginning on Wednesday in the most effective ways to pump prime the economy.

The meeting will be attended by the Reserve Bank of India and Niti Aayog officials among others.

It is expected that the government will take the infrastructure route to revive the economy rather than income transfers that run the risk of translating into savings by people during uncertain times, rather than increasing consumption.

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As opposed to that, the government feels spending on infrastructure such as building houses, roads, providing better health facilities as well as creating jobs will raise assets as these are labour intensive activities.

Discussions will also be held on more aggressive capital infusion in banks that will take care of looming NPAs on Covid times loans and their likely defaults. According to private estimates, banks are likely to restructure over Rs 8 lakh crore of loans or over 7.5% of the overall system’s credit under the recently announced loan recast package by RBI. It is feared that over 60% of these loans may slip into the NPA category.

Other subjects on which the prime minister is likely to initiate discussion could be public sector asset monetisation and speeding up sale of public sector enterprises that could raise revenues at the time when the tax collections have been seen declining due to lower economic activity.

“It is an elaborate agenda. Threadbare discussions will be held on the overall economy and how quickly and effectively it can be brought back on track,” said an official privy to the development.

The asset monetisation move will take care of the government’s ability to service its debt without having to limit its ability to spend on capital creation and essential services like education and health. According to various estimates, India’s debt-to-GDP ratio is expected to balloon close to 85% this year due to the government’s expenditures overshooting its incomes.

The meeting comes a day after India Inc sought to know the government’s medium-term fiscal roadmap in order to have clarity on the prevailing financial situation and chart out their own course of action.