Infrastructure-focused fiscal stimulus will be key to India's recovery as economic activities have slowly picked up pace, according to consultancy firm EY, which recently made a series of policy recommendations to finance government infrastructure spending, including public sector borrowing (centre and states) of 15 per cent of gross domestic product (GDP) in this fiscal to ensure financing of the National Infrastructure Pipeline (NIP) for the year.
To give further impetus to recovery, Prime Minister Narendra Modi during his Independence Day address stated that the government will spend over ₹110 lakh crore on about 7,000 projects of different sectors under NIP.Infrastructure-focused fiscal stimulus will be key to India's recovery as economic activities have slowly picked up pace, said EY, which made a series of policy recommendations to finance government infrastructure spending, including public sector borrowing of 15 per cent of GDP in this fiscal to finance the National Infrastructure Pipeline for the year.#
"To rejuvenate India''s growth, Centre''s capital expenditure will play an important role in creating positive effects on employment, GDP growth and other government priorities such as manufacturing, green energy, among others," Sudhir Kapadia, national tax leader, EY, said in a statement.
EY also recommended increasing the government’s fiscal deficit for this fiscal to 7 per cent of GDP.
As per RBI''s revised borrowing programme, fiscal deficit is estimated at 5.6 per cent of the GDP, it said, adding that additional 1.4 per cent (₹3 lakh crore) can be financed through deficit monetisation or borrowing from abroad at substantially low interest rates and spent on capex for infrastructure.
As per official data on the cumulated revenue collections under road and infrastructure cess and health and education cess, of the total collections from these cesses, there is a short transfer of about ₹2 lakh crore (0.9 per cent of the estimated FY21 nominal GDP) to the specified designated funds.These amounts should be available in the consolidated fund of India, the consultancy firm said.
Both put together will provide resources up to ₹5 lakh crore for potential infrastructure investment in the next few months, it added.
ALCHEMPro News Desk (DS)
marketing@alchempro.com
