Govt bets on infrastructure push, PSB recapitalisation to shore up economy

Key Highlights

• Bharatmala Pariyojana to be implemented with an outlay of Rs 5.35 lakh crores will generate 14.2 crores jobs.
• Government Commits to Rs 2.11 lakh crore Front-loaded bank recapitalisation to clean up legacy of NPAs 
• A total of Rs 1.35 lakh crore via recap bonds front loaded would be raised while Rs 76,000 crore via budgetary support and market raising.

Finance Minister, Arun Jaitley along with Economic Affairs Secretary of India, Subash Garg on Tuesday announced the government’s plans to recapitalise public sector banks (PSBs) and invest in infrastructure of roads and railways in India.

Speaking at the nation’s capital Jaitley said 'government has chalked out a roadmap to boost economy.'

The government will invest a total of Rs 6.9 lakh crore to build 83,677 km roads in a period of five years. And a total of Rs 2.11 lakh crore has been set aside for the recapitalisation of PSBs.

Infrastructure

Government plans to borrow Rs 2.09 lakh crore from markets to fund building of roads and highways across the country under the Bharatmala project, Finance Secretary Ashok Lavasa said.

Plans to seek Rs 1.1 lakh crore from private investors for Bharatmala projects will be used to build 34,800 kilometres of roads at Rs 5.35 lakh crore.

The Bharatmala project aims to connect all highways across India passing through main business centres.

Lavasa estimated capital expenditure by state-run companies to rise in coming months to Rs 1.37 lakh crore. He also added total government expenditure till September amounted to Rs 11.47 lakh crore.

PSBs

Unprecedented PSB capitalisation for more job creation, growth and investment, the government has announced a recap amount of Rs 2.11 lakh crore.

“This entails mobilization of capital, with maximum allocation in the current year, to the tune of about Rs. 2,11,000 crore over the next two years, through budgetary provisions of Rs. 18,139 crore, recapitalisation bonds to the tune of Rs. 1,35,000 crore, and the balance through raising of capital by banks from the market while diluting government equity (estimated potential Rs. 58,000 crore),” the government said.

Garg added ‘stronger banks are the need of the hour to catalyse private investment.’

A total of Rs 1.35 lakh crore via recap bonds front loaded would be raised while Rs 76,000 crore via budgetary support and market raising.

The government also said it will share a ‘two-year roadmap for recovery of PSBs.’

“There will be a strong push on enabling growth of MSMEs through enhanced access to financing and markets, and a drive to finance MSMEs in 50 clusters,” the government added.