The Indian Government has planned a slew of measures which include greater spending on the building of roads and expressways, recapitalization of banks and financial support for medium and small scale enterprises in 50 clusters. These measures should stimulate growth. The greatest challenge the BJP government faced in May 2014 was the balance sheet of banks, especially of nationalized banks. The government has now decided to pump Rs. 2.11 lakh crore into the state-run banks in the next couple of years. The details have not been worked out but the two year prospect is greatly reassuring to banks. Small and medium enterprises and smaller firms will also benefit as result of the capitalization since they cannot raise funds from the bond or debt markets should large banks refuse to lend. However, the capital infusion by the government should be accompanied by changes in the governance of these banks.
In 2016-17, total capital expenditure from the Indian budget was Rs. 290.299 crore, which was higher than the capital expenditure budgeted which was Rs. 247.023 crore. The budgeted capital expenditure for the current fiscal year is 309.801 crore. Rs. 146.300 crore has already been spent which is a welcome development. Capital spending by PSU’s and Railways is lagging. But road and transport tell a different story. 8230 kilometers of National Highways have been built in 2016-17 which was significantly higher than in preceding years. Rural road construction has made headway. The Prime Minister Gram Sarak Yojna has registered good growth. There seems to be no need for a fiscal stimulus. However, private sector investment which plays a significant role in growth has unfortunately shrunk.     Â
