Dinesh Kamath's Editorial 'Good attempt to give Indian economy a boost' that was published in Newsband

Good attempt to give Indian economy a boost

The Centre plans to infuse ₹2.11 lakh crore of fresh capital into public sector banks over the next two years. This should help revive the growth momentum.

India’s bank credit growth has slipped to a 60-year low of just 5% this April. Public sector banks have naturally been in damage control mode rather than chasing growth like their private sector peers. the overall plan gives banks a better sense about their immediate future.

The Centre is betting this will strengthen the banks’ ability to extend credit at a faster clip. RBI Governor Urjit Patel has said this is the first time in a decade that there is a real chance of meeting the banking sector’s challenges.

The reforms that Finance Minister Arun Jaitley has promised will give further boost to the functioning of public banks. Let us hope this will be the first step to clear the current messy economy. And let us hope this is not some election-fever agenda to win brownie points. A welcome move indeed if well thought out, and correctly implemented.

Indian economy shows promise of experiencing low inflation, comfortable current account and fiscal deficits, an unprecedented disinvestment target and a positive outlook for GDP growth in the coming quarters.

The performance of the economy, particularly after demonetisation and the implementation of the GST, has made the Centre face many criticisms. “The economy is on strong macroeconomic fundamentals,” Mr. Jaitley says.  

India grew at a very strong pace of 7.5% per year in the three years of 2014-17 with growth exceeding 8% in 2015-16. There was a temporary slippage in growth in the last two quarters, thanks to the transitional effect of demonetisation and GST. That effect is now over,

There is expectation of very good growth from second quarter of current year itself. The gross FDI flows to India in 2016-17 amounted to $60.2 billion, as compared to $55.6 billion in 2015-16 and $45.1 billion in 2014-15, indicating the improved global confidence on the Indian economy,

Good news is that the world economy is picking up. The good news in India is that IIP or Index of Industrial Production has also picked up.