Reserve Bank of India (RBI) Governor Shaktikanta Das Monday pitched for a “big push” to certain targeted mega infrastructure projects, accompanied by new financing options, to reignite growth in the economy. He suggested a series of reforms in the electricity sector to promote solar energy via accelerated depreciation benefits and fiscal incentives.
Identifying infrastructure as “force multiplier for growth” and one of the five silent dynamic shifts happening in the economy, he said: “As in the case of the golden quadrilateral, a big push to certain targeted mega infrastructure projects can reignite the economy. This could begin in the form of a north-south and east-west expressway together with high speed rail corridors, both of which would generate large forward and backward linkages for several other sectors of the economy and regions around the rail/road networks.”
In a series of recent meetings with Prime Minister Narendra Modi, senior government officials have suggested increasing targeted investments in the infra space to support economic activity. In his address to CII National Council members via a video link Monday, Das argued for diversifying financing options for infra projects to support around $ 4.5 trillion for investment in the sector by 2030, as estimated by NITI Aayog.
Arguing that the corporate bond market was turning the coroner especially for lower-rated companies, he said more initiatives are required to promote funding for infra projects. “Non-performing assets (NPAs) relating to infrastructure lending by banks have remained at elevated levels. There is clearly a need for diversifying financing options. Promotion of the corporate bond market, securitisation to enhance market-based solutions to the problem of stressed assets, and appropriate pricing and collection of user charges should continue to receive priority in policy attention,” he said. He identified said five dynamic shifts that are underway in the Indian economy: fortunes shifting in favour of the farm sector; changing energy mix in favour of renewables; leveraging information and communication technology, and start-ups to power growth; shifts in supply/value chains, both domestic and global; and infrastructure as the force multiplier of growth.
The share of renewable energy in overall installed capacity has doubled to 23.4 per cent at end-March 2020 from 11.8 per cent at end-March 2015. As much as 66.6 per cent of the addition to total installed capacity during the last five years has been in the form of renewable energy, which contributed 33.6 per cent of the incremental generation of electricity.
“Going forward, this landmark progress could result in a significant overhaul of the power sector, encompassing deregulation, decentralisation and efficient price discovery. Policy interventions in the 5 form of renewable purchase obligations (RPO) for DISCOMs, accelerated depreciation benefits and fiscal incentives such as viability gap funding and interest rate subvention will have to go through a rethink/need review,” he said.
To queries on adequate level of exchange rate, he said the RBI has no fixed target for the rupee but monitors undue volatility in the currency. Das said the recent interventions by the central bank and the government has led to a “marked improvement” in the market conditions for corporate bonds, and the position has improved even for below AAA-rated corporates. Amid uncertainties, it will continue to remain vigilant and will not hesitate to act when necessary, he said.
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