Reserve Bank of India Governor Shaktikanta Das on Monday called for stepping up investment in the infrastructure sector to restart the economy reeling under the impact of covid-19 pandemic.
In his address to the members of Confederation of Indian Industries (CII) Das suggested that there is a need for a big push for mega infrastructure projects to restart the economy. He said that both private and public sectors would have to play an important role in developing infrastructure that requires huge investments.
“As in the case of the golden quadrilateral, a big push to certain targeted mega infrastructure projects can reignite the economy. This could begin in the form of a north-south and east-west expressway together with high speed rail corridors, both of which would generate large forward and backward linkages for several other sectors of the economy and regions around the rail/road networks," he said.
Das also added that there is a need for diversifying infrastructure financing instruments that can take care of the long term risk. The country would need around $4.5 trillion for investment in infrastructure by 2030, according to Niti Aayog estimates
“On financing options for infrastructure, we are just recovering from the consequences of excessive exposure of banks to infrastructure projects. Non-performing assets (NPAs) relating to infrastructure lending by banks has remained at elevated levels," Das said.
Promotion of the corporate bond market, securitisation to enhance market-based solutions to the problem of stressed assets, and appropriate pricing and collection of user charges should continue to receive priority in policy attention, he said.
Das also said that India must increase share in global value chain for better economic welfare. Investment in sectors with strong forward and backward linkages in the supply chain can generate higher production, income and employment, he said.
As globally, there is a shift happening in the global value chain in response to covid-19, Das added that India should focus on greater strategic trade integration, including in the form of early completion of bilateral free trade agreements with the US, EU and UK, besides focusing on diversifying sources of imports.
Das also noted that there is a need to shift the terms of trade in favour of agriculture for sustaining the transformation in the sector.
“Experience shows that in periods when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added (GVA) exceeds 3%. Hitherto, the main instrument has been minimum support prices, but the experience has been that price incentives have been costly, inefficient and even distortive. We need to move now to policy strategies that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers," he said.