Invest government economy stalling

Invest government economy stalling

Economic recovery appears to be plateauing. The Manufacturing PMI for July has slid to 46, down from 47.2 in June, amidst local lockdowns and messy unlocking nationally. The government surely needs to change policy gears and induce capital formation, directly or indirectly, which would clearly be distinct from using fiscal resources for relief, civil supplies and public distribution.

It is true that some economic indicators have improved somewhat in July. Goods transport, rail freight, car sales and exports have rebounded, but the entire retail segment remains sluggish and credit growth is actually negative over this fiscal. Hence the policy imperative for the Centre to step in and do the heavy lifting to shore up investments, which, in turn, would spur overall growth.

The latest figures show that the Centre’s capital expenditure has shot up by a credible 40%. The sharp fall in the rural employment guarantee programme for July is good augury indeed. Agricultural labour demand has shot up. The way forward now is to pitchfork investments and speedily coagulate funds. The Centre has called upon central public sector enterprises to fast-forward capital expenditure, for which about Rs 1,60,000 crore has been budgeted this fiscal.

The relevant projects need expediting. The watchword needs to be focused policy attention for big-ticket investments. Reports say that 80 coal blocks have been identified for commercial mining. Fast conduct of auctions for at least a dozen large coal blocks, along with parallel investments for evacuation and coal beneficiation would generate diverse demand with forward and backward linkages. With our large reserves, there is no earthly reason to import over `1lakh crore of steam coal annually.

A national programme for rental housing would make eminent sense. The proposed Credit Guarantee Enhancement Corporation (CGEC) has its work cut out to make corporate bonds of infrastructure projects attractive. It can free up lending of up to Rs 3.5 lakh crore by banks. A package of investment measures is required. The sooner, the better.