Union finance minister Nirmala Sitharaman will deliberate with chief ministers and state finance ministers on Monday on issues ranging from affordable land to faster approval processes to boost investment and economic growth. The virtual conference is aimed at capitalising on the “positive sentiment” on the Indian economy.
“There is a lot of capital expenditure from the central government side (30% more on year in FY22) and there is a positive sentiment on the private sector side, which perhaps not fully translated into actual investments…capital market activity indicates that a lot of investment is probably on the cards. So, this positive sentiment is something that the finance minister and the government believes should be capitalised upon in order to take India forward,” finance secretary TV Somanathan said.
The coordination with states on improving investment climate is expected to complement the Centre’s recent initiatives such as a National Master Plan for ‘multi-modal connectivity’ called it PM Gati Shakti, the five-year Rs 111-lakh-crore National Infrastructure Pipeline and multiple efforts to generate resources for it, including the National Monetisation Pipeline of public sector assets and the development finance institution (DFI) being operationalised.
The state governments and their policies play a critical role in leading the country to the higher growth and development. “The focus of this interaction will be on state-level issues, state level opportunities, state level challenges,” Somanathan added.
Economic affairs secretary Ajay Seth said issues such as availability of water, land pricing, ready availability of land bank, adequate power and financial condition of state electricity Discoms may figure in the discussion with the states. “The union government will extend if any policy support is required,” Seth said.
Implementation of NIP would accelerate annual investment in the country from about Rs 12 lakh crore/annum (Centre, states and privates sector) to about Rs 20 lakh crore/annually, Seth added.
First four months of FY22 have already witnessed inflows of $64-billion foreign direct investment (FDI), finance ministry said in a statement on Friday. “The envisaged interaction will attempt to create a policy discourse and a facilitative environment for inward investment-led growth. This will be enabled by a pro-active approach to investment promotion, efficiencies brought about by ease of doing business reforms, and an emphasis on accelerating approvals and clearances up to urban local bodies (ULB) levels,” it added.
On Friday, the ministry said seven states can borrow an additional Rs 16,691 crore for achieving the capital expenditure target set by the Union finance ministry in the till the second quarter of 2021-22.
The Centre has asked states to undertake Rs 1.1-lakh-crore more capex in FY22 than Rs 5 lakh crore achieved in pre-Covid year of FY20. The states are allowed net borrowing of 4% of GSDP in FY22 with 50 basis point of this linked to achievement of incremental capex over their investment in FY20.
Data gathered by FE of 14 major states showed that these states reported a combined capex of Rs 97,121 crore in April-August of FY22, up 97% on year compared with a decline of 46% on year in the corresponding period of FY21. These states’ capex in April-August 2021 was 6% higher compared with the corresponding period of the pre-pandemic FY20.