In view of the credit/cash crunch what practical steps should be taken to see that infrastructure projects come through the global financial crisis.
No doubt, the global economy is in turmoil and if the crisis continues the spectre of ‘recession’ would stare in the face of all countries, both developed as well as developing. At home, the experts rightly believe the Indian economy can bounce back if the government and the Central Bank get their act right to keep the investment regime from slipping further. When confidence of the investors and credibility of the financial institutions come under a cloud, there is every likelihood of the economic situation going haywire. Since the oxygen of economic growth and its continued sustainability depend upon free and soft flow of funds, it is imperative that the problem of liquidity and lending rates are addressed to on a priority basis. There is no denying that growth requires money and in most cases excess money supply in the market leads to inflation. Wisdom lies in striking a balance between growth and inflation.
When the economy is under stress because of credit and liquidity crunch, it is prudent on the part of ‘powers-that-be’ to take both short- and long-term measures to keep the tempo of infrastructure development on track. Any hasty step in such a situation can prove worse than the dilemma that has already unnerved many a heart.
There is no denying the crisis is too deep to be ignored. Lest we are overwhelmed in the gathering clouds of ‘slowdown economic growth’ affecting employment generation and poverty alleviation programmes, it is time to boost domestic demand, improve productivity and prevent rupee depreciation. We should also focus on growth by improving public and private investment, continue to take measures for improving liquidity and enhance investor confidence to ensure growth of industry. There is also an urgent need to cut interest rates, and get the fiscal house in order to generate resources for infrastructure investment.