Govt to infuse ₹2.11 lakh cr into PSU banks over 2 years
New Delhi: Macroeconomic fundamentals are strong, and GDP growth is poised for a take-off with the economy turning around, the government said on Tuesday as Finance Minister Arun Jaitley and top officials presented a detailed economic roadmap. Among big-ticket announcements made on Tuesday was an "unprecedented" infusion of Rs. 2.11 lakh crore in public sector banks to boost lending. The government also said that 83,677 km of highways would be built in the next five years to "create more jobs, more growth."
"We strengthened banks unlike in 2008 and 2014 when loans were given by the dozen, and the real situation of banks were not discussed. It is only since 2015 that the ground realities in banks have changed, and they have become robust," the Finance Minister said at a media briefing after the Cabinet meeting.
"There is a public sector bank capitalisation plan of Rs 2.11 lakh crore to strengthen the lending capacity of banks. Now all bonafide loan-seekers would get a loan from the banks as post-demonetisation public sector banks have an adequate lending capacity," the minister said, adding that infusion of Rs 2.11 lakh crore is "unprecedented".
Hailing the decision, Jaitley said, "Once you strengthen banks, the appetite for their stock will improve. A bold step needs to be taken by the government to recapitalise banks. It will give a fillip to private sector investment, direct benefit to MSMEs and employment."
On willful defaulters, the Finance Minister said that over 8,100 wilful defaulters owe banks over Rs 76,600 crore and there is no embargo as far as willful defaulters are concerned.
"The real GDP growth average is 7.5% in the last three years," said Subhash C Garg, secretary in the department of economic affairs. He also stated that indicators show "the worst is over and we are now back on the path to a high rate of growth in the next many quarters to come."
Finance Secretary Ashok Lavasa made a presentation on the government's spending on infrastructure to "create more jobs, more growth," detailing that 83,677 km of highways will be built in the next five years at the cost of nearly 7 lakh crore. "It will create 14 crore man-days of jobs," he said.
The World Bank has called the slowdown an "aberration" mainly due to a temporary disruption caused by preparations for GST and said this would get corrected in coming months. It said that the new tax regime would have "a hugely positive impact on the economy."
The International Monetary Fund (IMF) lowered its growth forecast for the current and next year, but days later its chief Christine Lagarde said that the Indian economy is on a "very solid track" in the mid-term.