Raise money by issuing bonds in overseas markets
A business leader has called on the Government for a policy on refueling consumption demand in the country to regain the lost economic growth momentum.
Making the call, Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry, in a press statement issued here today.
Since the lockdown caused by COVID-19 in the month of March 2020, he noted that Government has very well addressed the investors’ and the industry’s sentiments since the March 2020 lockdown caused by COVID-19.
But the focus should now be on fuelling consumption growth, which is one of the key engines of economic growth, said Aggarwal in a statement on 24 Oct 2020.
At this juncture, the next stimulus package should prioritize demand creation measures to attain a positive growth trajectory in the later quarters (Q3/Q4) of this financial year 2020-21.
“Demand creation will have multiplier effects on the other sectors of the economy including enhanced production, increased investments and employment creation, said Aggarwal.
The increased spending on infrastructure will give a multiplier effect to rejuvenate the aggregate demand in the economy and to mitigate the daunting impact of COVID-19 on the economy, he said.
Undoubtedly, the robust growth of infrastructure is the key ingredient to realize the vision of US$5 trillion economy by 2024-25 and to become Atmanirbhar Bharat, he added.
Investments in infrastructure will have a multiplier effect on the economy as there is a high correlation between the two.
So, Rs.111 lakh crore investments in the infrastructure will certainly boost the growth trajectory of the country and take the size of the economy to the level of US$5 trillion by 2024-25, said Aggarwal.
“We have a significantly better external debt to GDP ratio at 20.6% as compared with 95.2% in the USA, 83.5% in Japan, 301.8% in the UK, 230% in France and 119.6% in Canada,” Aggarwal highlighted.
At this juncture, the Government can consider raising investment funding for the National Infrastructure Pipeline (NIP) through borrowings from overseas markets by the issuance of overseas bonds through an SPV that could act as a mega Development Financial Institution (DFI), said Aggarwal.
The DFI could initially finance public sector infrastructure investments, and, as the economy picks up steam, could also finance the private sector infrastructure projects. In the past, Governments around the world have often used DFIs to fund industrial and infrastructure investments, said Aggarwal.
Financial as well as technical support extended by DFIs would also help in efficient and timely infrastructural development in the country. Overseas borrowing will allow the government to bring in diversification in its borrowing along with significantly reducing dependence on the domestic market, thereby leaving room for the private sector to raise capital for investments, said Aggarwal.
Another way to promote greater infrastructure development is to use a part of India’s high forex reserves for investment in infrastructure development after due diligence and proper safeguards, according to Aggarwal.
“We have a large chunk of foreign exchange reserves of US$555 billion as of October 2020. At this juncture, forex reserves could partly be used to give a new direction to create state-of-the-art infrastructure in India at a faster pace,” said Aggarwal.
Increased public investments in infrastructure will create demand for commodities such as steel, cement and power and in turn boost private investments and create new employment opportunities in the country, said Aggarwal.
There is a need to enhance the cost competitiveness of domestic businesses and enterprises, along with the creation of a level playing field in the country, he said.
The Government should focus on further reducing the cost of doing business in the country including the costs of capital, costs of compliances, costs of logistics, costs of land along with the availability of land and flexibility in hiring the workforce vis-à-vis flexible labour laws, said Aggarwal.
This will help in attracting a large chunk of foreign and domestic investments and boost industrial activities and create tremendous employment opportunities for the growing young workforce in the country.
Going ahead, there is a need to sustain the reform momentum set by the Government and to focus on the implementation of the reforms at the grassroots level with a great synchronization of policies between Central and State Governments, said Aggarwal. #economy #investment #banking #manufacturing /fiinews.com
