Vinayak Chatterjee’s Radical Rs 30-Lakh-Crore Plan To Save The Economy 
The sun sets behind residential buildings in Noida, Uttar Pradesh, India (Photographer: Anindito Mukherjee/Bloomberg)

Vinayak Chatterjee’s Radical Rs 30-Lakh-Crore Plan To Save The Economy 

India needs to look beyond its budgetary provisions to finance a recovery as the economy is in a deep hole right now, according to infrastructure industry veteran Vinayak Chatterjee.

“Forget the Union Budget. Let it work as a routine. Apart from that, start a new fund, a National Renewal Fund. Historic. Like Franklin Roosevelt’s new deal after the Great Depression,” said Chatterjee, chairman at the Feedback Infrastructure Group and also head of Confederation of Indian Industry’s Infrastructure Council.

“We need to have a new box, which is out of the box, called the National Renewal Fund,” he said in an interview with Quintillion Media’s Editorial Director Sanjay Pugalia. “This needs to be at least 14% of the GDP or around Rs 30 lakh crore, and outside the Consolidated Fund of India.”

The Modi administration announced what it calls a Rs 20 lakh crore self-reliant India package to help the economy during Covid-19 crisis. It includes relief for the poor, guarantees for non-bank lenders, support to the power sector and more. Yet, the government’s additional spending is less than Rs 2 lakh crore as it covers existing schemes and liquidity measures announced by the central bank.

Chatterjee said he has made a pitch during consultations with the Finance Ministry about the revival of the economy. The fund he suggests will be used beyond just infrastructure and in areas ranging from the power sector to social security for the underprivileged.

The Rs 30-lakh-crore figure comes from Chatterjee’s calculation of what each ailing sector of the economy requires. He said up to Rs 2 lakh crore needs to go towards revamping power distribution companies. Another Rs 10 lakh crore is needed for the infrastructure sector to fund public works and generate employment. The social sector needs minimum Rs 3 lakh crore while another Rs 1 lakh crore is needed to bolster healthcare infrastructure.

States, which have lost revenue due to the pandemic, will need support programmes up to Rs 6 lakh crore. Another Rs 5 lakh crore will be required to recapitalise the financial sector and make them able to lend again. The rest Rs 3 lakh crore is needed for specific support to small businesses, Chatterjee said.

Chatterjee says lack of labour is one of the immediate hurdles to economic revival. (Photographer: Sanjit Das/Bloomberg News)
Chatterjee says lack of labour is one of the immediate hurdles to economic revival. (Photographer: Sanjit Das/Bloomberg News)

“But where will you bring this Rs 30 lakh crore from? The Consolidated Fund of India won’t be able to do this,” Chatterjee said. “You require a National Renewal Fund. Sixty percent of this should be domestically funded. The Reserve Bank should print money and subscribe to that fund. The rest should be taken from friendly overseas developmental institutions.”

The finance ministry and other officials have been receptive to his idea but find it too bold to implement, Chatterjee said. “No one is disputing the idea. People are just finding it hard to swallow it with its enormity.”

Yet, he sees no other option for an economic revival. “Private sector balance sheets are stressed. And even before Covid, the leverage was high. After Covid, no private infrastructure development firm is ready to make new investments,” he said. “If you don’t do this what will you do?”

Chatterjee acknowledges that the economy is showing signs of recovery but that’s only because things are starting to open up after a full shutdown. He said that the scale of the “war-like” challenge cannot be overcome by traditional thinking.

If an economy is contracting about 40% in a quarter and about 10% in a year then green shoots of recovery won’t fix it. We need a sledgehammer.
Vinayak Chatterjee, Chairman of National Council On Infrastructure, CII

Watch the full interaction between Sanjay Pugalia and Vinayak Chatterjee here.

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