Finance Minister Arun Jaitley said when structural reforms happen, there can be some temporary hiccups
Macro economic 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 will be built at an investment of 6.9 lakh crore in the next five years to "create more jobs, more growth."
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Of the Rs 2.11 lakh crore to be infused into public sector banks over two years, Rs 1.35 lakh crore will be through recapitalisation bonds, while remaining Rs 76,000 crore will come from budgetary support and equity issuance, Financial Services Secretary Rajiv Kumar said. Mr Jaitley said the recapitalisation of banks would be followed by a series of reforms. He did not give details.
Arun Jaitley said after growth slumped to a three-year low of 5.7 per cent in the first quarter, his ministry has held detailed discussions, including with Prime Minister Narendra Modi. "When structural reforms happen, there can be some temporary hiccups, but there are a lot more benefits in the medium and long term," the finance minister said.
Top officials of the finance ministry made detailed presentations. "The real GDP growth average is 7.5% in the last three years," said Subhash C Garg, secretary in the department of economic affairs, also stating that a number of 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."
Mr Garg said inflation is low, forex reserves are over $400 billion, Foreign Direct Investment is up and the government is on track on fiscal deficit.
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 a cost of nearly 7 lakh crore. "It will create 14 crore man days of jobs," he said.
Tuesday's presentation of an economic plan comes as critics and political rivals have attacked the BJP-led government, attributing the economic slowdown to what they call poor handling of key reforms like last year's demonetisation and the Goods and Services Tax (GST), implemented in July this year.
The Congress has attempted to turn the slowdown into an election plank ahead of key assembly polls in Gujarat and Himachal Pradesh, with its vice-president Rahul Gandhi building his campaign around attacks on the government over the economy.
Prime Minister Narendra Modi has defended his government's economic policies, calling out critics for "spreading pessimism" over "one quarter of slow growth."
PM Modi also said at a rally in Gujarat last week that "the decision to implement the reform was not of Prime Minister Modi alone." He said there were nearly 30 parties that were consulted and involved with the new tax, of whom he singled out one. "The Congress is an equal partner in GST decisions. They should not spread lies on GST," he said.
Earlier this month, Arun Jaitley met with his counterparts from states on the GST Council and revised rates on a range of items, among them those crucial to traders in Gujarat like the khakra snack and man-made textile yarn. Critics pointed out these concessions were intended to ensure the BJP was not penalised by small and medium sized businesses in Gujarat, which will vote before December 18.
