Saturday, November 8, 2008

Indian Govt Will Spend Rs. 250 Bn on Infrastructure: Kamalnath

The News:

The government will pump-prime the economy by investing Rs.250 billion (Rs.25,000 crore) in areas like infrastructure but without worsening the country's fiscal deficit situation, Commerce Minister Kamal Nath has said.

The minister also said that the government would continue to remain cautious in printing currency notes, so as not to add to the fiscal deficit while making the huge investment. Funds will be found by reallocating revenues.

'So it's going to happen within the confines of good financial management.'

My Views:

I have one word for the idea that Kamalnath shares - BRILLIANT. But, the point is, it should be exactly what he says - "within the confines of good financial management." India has a different economic structure than that of USA, which can be termed as "Cautiously Capitalistic". Infrastructure expenditure of a massive scale is urgently required for real development but we have seen in past that this has a significant impact on fiscal deficit. Whatever enthusaiastic people say, the fact is India is an "Underdeveloped" country if we just consider the majority of population, their education, employment and living standard. A big spending on infrastructure development will be the best stimulus for growth and development of masses.

However, the Commerce Minister's idea to "reallocate" funds is doubtful. Such a big amount can't be just reallocated just like that. Other sectors like education, health are also in big need of capital. The one sector which is unnecessarily occupying a larger than required share is defense. But reallocating money from there will be very difficult and almost impossible considering the political opposition govt risks and that too just before general elections in few months.

As I already said, the idea is brilliant but when we sit down to work out the details, it looks like it would be very difficult to implement without printing more currency (which the minister rejected). If the govt is determined to work it out, they very well, can. But the question is - do they have that kind of political will?

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