Encash part of forex reserves to fund infrastructure: PHDCCI president2 min read . Updated: 19 Oct 2020, 02:11 PM IST
- There is so much pension money lapping around the shores across the world; there is so much liquidity that has been generated that has no destination right now. Why can’t the government guarantee a return?
New Delhi: While supply-side interventions have been made, India needs a huge demand push to sustain the economic green shoots. Sanjay Aggarwal, president of PHD Chamber of Commerce and Industry (PHDCCI) and chairman & CEO, Paramount Communications Ltd, said the central government is the only agency with options to help a demand revival considering that both consumers and the private sector are in no mood to spend. Excerpts from an interview.
What is your sense of where the Indian economy is headed this year and how would the recovery path look like?
For FY 21, a consensus is building up around -9% to -11% of GDP growth. At the same time, what is encouraging is the high frequency indicators at the end of September — GST, exports, manufacturing PMI is up. One does get a feeling the worst is behind us. But how much better are we going to do? That is a matter of guess. There would be a lot of pent up demand because of the closure that will be serviced. However, the third and fourth quarters will be very crucial for the path the economy takes.
What are some of the sectors that need more attention to sustain the green shoots we have seen?
The biggest trouble has been caused to tourism, aviation, hospitality and people who are dependent on footfalls such as malls and closed air-conditioned spaces. Sectors directly hit definitely needs better support. If you allow a good part of the tourism and hospitality sector to sink, you won’t be in a position to make them recover later — the loss for the year might become a permanent loss.
Overall, it is the demand in the economy that needs support. That is PHDCCI’s view and my personal view as well. Supply has been given good support but we are looking at a war-ravaged economy and this is the time we need to take some large-scale steps. People are saving for harder times. It is very difficult to expect either the consumer or the private industry to be investing except for necessities. The economy cannot grow unless there is a push on the demand side. For that, we need a front-loading of the National Infrastructure Pipeline, which was announced in December 2019. We are supposed to invest ₹1.02 trillion over five years. Now is the time to talk about this plan. We have to inject a lot of money into the economy for productive purposes, to build assets. That is going to bring optimism back. But today, the central government is the only agency which has so many options.
Where could the government raise the money from?
There should be a funding plan for the infrastructure investment. We are of the view that it might be a good idea to consider encashing a part of the forex reserves. Do we need such large forex reserves? Even for borrowing, there is sufficient scope. There is so much pension money lapping around the shores across the world; there is so much liquidity that has been generated that has no destination right now. Why can’t the government guarantee a return? You float a National Investment Corporation or something similar, which takes funds for investments into infrastructure projects. Let the government guarantee that the interest and the principal would be paid on time. I don’t think there would be any limitation on the money considering the size and strength of the Indian economy.