Revive public investment to improve investment climate: Economic Survey 2014 - 15

To improve the investment climate and reduce the backlog of stalled projects, Economic Survey 2014 - 15 argues for a three-pronged strategy:

1. The Survey recommends revival of public investment in short term, to act as an engine of growth in infrastructure sector. It argues that public investment cannot be a substitute for private investment; but is required as a complement and to crowd it in.

2. Creative solutions need to be devised to strengthen institutions relating to bankruptcy, says the Survey. This will ensure that exit options are available. This will also ameliorate over-indebtedness that lowers the capacity to generate new investments. Towards this end, it contemplates setting up of a high-powered Independent Renegotiation Committee.

3. Economic Survey highlights the need for reorientation and restructuring of the PPP model. This is expected to make them more viable in future.

These recommendations come in the backdrop of a large number of stalled projects. The total stock of stalled projects stands at Rs. 8.8 lakh crore or 7% of GDP. Economic Survey states cause of stalled projects is different for private and public sectors. In private sector, credit related factors dominate, while in the public sector, delay in regulatory clearances is the primary reason. Stalling of projects has put tremendous pressure on the balance sheets of the corporate sector and public sector banks. This in turn, limits future private investment, thus completing and perpetuating a vicious cycle.

Powered by Capital Market - Live News