Need for industry bailout, infra push

Sandeep Dikshit
Tribune News Service
New Delhi, July 3

In the Union Budget, a new government is usually not shy of taking hard decisions, which may be unpalatable with many sections of the populace. In the first Budget of its second term, the Narendra Modi government may attempt to restore the balance between fiscal prudence and the need to step up spending to rejuvenate business and economic sentiments.

Both government spending on infrastructure and a package for the industry need special attention after the extraordinarily extended election season when political attention was focussed on short-term palliatives.

As a result, India has relinquished the fastest growing economy status to China after holding the top rank for a couple of years. Growth in the most recent quarter slowed down to 5.8 per cent, the weakest in five years, while new investment proposals are half of the previous years.

The new Budget will be compelled to maintain welfare schemes — income support to farmers alone will account for Rs 90,000 crore. But it will now also have to cater to the needs of the industry and commerce that have suffered an indifferent fate for the past six months with the only panacea being the RBI’s marginal lowering of interest rates.

Union Finance Minister Nirmala Sitharaman was unable to turn around the falling exports in her stint as Commerce and Industry Minister. Neither was India able to strike new free trade agreements that left it a laggard, especially among its East and South East Asian peers.

In her second stint in an economic ministry, besides an indifferent global economic outlook, Sitharaman will have to contend with nature — monsoon has been deficient so far.

Given the lower consumer demand and shortfall in governmental income, it will be a challenge for Sitharaman to allocate more for infrastructure as well as give concessions to a struggling industry.

Gross credit to the industry slumped by half in May as compared to the previous year while the mess of nonperforming assets has spread from nationalised banks to private ones and non-banking financial companies.

But the industry and government spending need closer attention after being overlooked in favour of more poll-friendly handouts. Unemployment has touched a 45-year high and a permanent solution lies in the private industry creating jobs rather than bottling the problem by sector-specific handouts.