In the opinion of experts, investment in infrastructure (including the use of foreign exchange reserves) can help revive the sagging Indian economy. Comment.
For a number of years economic growth and job creations in different sectors of the Indian economy had been in consonance with the projections prepared by planners and policy makers. But now, under the adverse impact of global meltdown, the economy has been in the throes of slowdown, adversely affecting almost all areas, the worst hit being the exports sector. As a result of the downturn not only has the GDP shown a downward trend but the services sector has also lost jobs, creating a near crisis situation for job seekers, exporters, realtors and others. Even the three stimulus packages announced by the Central government to give a boost to the sagging economy have not produced the desired results. Perhaps, much more needs to be done to give a push forward to the economy.
There is no denying that the credit crunch in the Indian banking sector as a consequence of the global economic meltdown has hit the crucial infrastructure sector hard. Some knowledgeable voices express their concern about the health of our infrastructure thus: “If our infrastructure gets delayed, our economic development, job creation and foreign investment get delayed. Our economic agenda gets delayed—if not derailed.” In the ramshakle state in which infrastructure is today, it is robbing the country of substantial investment that would otherwise have come its way. Besides, it is deterring tourists and affecting industry in myriad ways. There is indeed much to do in the infrastructure sector to come up to international standards. Highways, modern bridges, world-class airports and sea ports, reliable power and clean water are in desperate short supply. Undoubtedly, there is no dearth of skill, labour or technical know-how. The biggest problem is the hurdles one must cross with the government/bureaucracy. The Central government has responded to the all-round credit crunch by asking the State governments to build infrastructure projects through public-private partnership and has offered liberal assistance.
In the opinion of World Bank’s chief economist (Justin Yifu Lin) time is ripe for India to use its foreign exchange reserves (over $ 250 billion) in infrastructure which will put the economy on fast track growth. The only mantra now is to remove infrastructure bottlenecks so that the economy is ready for high growth path when global revival takes place. The use of foreign exchange reserves would not only revive growth momentum but also generate employment. All said and done, making fiscal stimulus plans work offers a potential win-win solution. Investments in infrastructure not only increase demand but also their growth and the government revenues.