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Finance Minister Arun Jaitley said on Saturday that structural changes brought in by measures such as the introduction of the goods and services tax (GST) had created a “hiatus” in the economy. But the economy was already showing signs of revival, he added. The FM also sent out a strong message to the banks asking them to perform after the Union government pumps in money to recapitalise them. “Resilience of the banking system is under test,’’ he said.
Banks had to take responsibility to spur economic growth after recapitalisation, the FM said. “The taxpayers in India and the body of taxpayers include the middle class and low middle class…. They are all making a sacrifice to keep you in good health. The money which is being infused is the money which can be used for other social services. But that’s being infused to make sure you are kept in good health so that you are able to improve upon the credit and growth process of the country.” He added: “Therefore, in the next few years, your performance is really under test.”
Jaitley was speaking at the 75th foundation day celebration of UCO Bank, a day after the first Advance Estimate for India’s GDP growth released by the Central Statistics Office (CSO) showed that economic growth in 2017-18 was estimated to slow to a four-year low of 6.5 per cent, against 7.1 per cent in the previous year.
“We were perhaps the only economy in the world which had the courage to undertake a number of structural changes. Those structural changes can create a transient hiatus in any economy. It can create a temporary challenge but as soon as that challenge gets over and the curve starts moving again, it moves for the better,” Jaitley said. “We can see the green shoots of that movement already coming about,” he added.
Global steel prices had started moving up and there was a “lot of movement” in the infrastructure sector along with a rise in the banking sector’s lending to the industry, he pointed out.
The lending growth would further be bolstered by the Rs 2.11 trillion recapitalisation plan that includes capital infusion through Rs 1.35 trillion recapitalisation bonds, according to Jaitley. Parliament recently gave a go-ahead for additional capital expenditure of Rs 800 million for recapitalisation of banks through bonds.
“The last few data that has come out has shown that credit growth has moved up and once this infusion of capital takes place in the banking system, credit growth will further move up.” The FM observed that “when that moves up, coupled with the revival of global commodity prices, one should really visualise a better future from the current challenge that faces you."
The credit growth rose to 10.7 per cent in December last year compared to 9.6 per cent in November and 7.2 per cent in October.