The government must invest more on infrastructure, such as roads and rural projects, besides focusing more on healthcare, Vineet Agarwal, who recently took over as Assocham president, said
The Associated Chambers of Commerce and Industry of India, or Assocham, expects finance minister Nirmala Sitharaman to announce bold measures in the Union budget to help shift the economy into high gear.
The government must invest more on infrastructure, such as roads and rural projects, besides focusing more on healthcare, Vineet Agarwal, who recently took over as Assocham president, said.
“The country has bounced back in the last few months. The fast growth is quite evident now. We are looking at a V-shaped recovery. So clearly, there would be certain priorities for the government. One would be to ensure that in the consumption-linked economy demand should not come down. Perhaps a certain amount of rationalization, in terms of taxation, specifically in GST would be of use. Things such as infrastructure spending, especially the national infrastructure pipeline is something which is very critical," Agarwal said in an interview.
“Healthcare sector across the entire value chain, both public and private, has become the most important imperative," he said.
Agarwal also expects higher outlay for schemes such as the Pradhan Mantri Grameen Sadak Yojana in the budget. “Road construction will help create the enabling ecosystem for agriculture supply chains. This also has a trickle-down effect in increasing rural employment, incomes and a better standard of life," he said.
Fiscal deficit will be higher than the government’s target, Agarwal said, and expects the finance minister to relax target to support nascent recovery.
“In fact, under the given circumstances, the fiscal deficit should not be compared with the past, at least for the next couple of years. Fiscal deficit of 7-8% of gross domestic product or even higher must not bother us as long as we spend on productive sectors," Agarwal said.
There was also an urgent need for a specialized development financial institution, as banks are shying away from financing large projects due to high bad loans, he said.
The economy is projected to contract by a record 7.7% in 2020-21, according to the latest official estimates. In April-November, fiscal deficit was at 135.1% of the full-year target at ₹10.8 trillion. November saw a sharp ramping up of government spending, with revenue expenditure rising 32% and capex increasing nearly 250%, albeit on a small base.
“The development of asset reconstruction companies (ARCs) will be very critical once the Insolvency and Bankruptcy Code starts again. Then ARCs will gain a lot of traction. These are some of the things that the banking sector can look at," Agarwal said.