RBI Governor Shaktikanta Das on Wednesday said that the Centre needs to ramp up spending on infrastructure sector which will in turn help in pooling in private investments for the sector.
In an exclusive interview with CNBC-TV18, Das said, "Government has to increase spend on infrastructure. It is expected that infra spending will crowd in private investment."
Union Budget 2021 announcements for physical infrastructure spending are targeted significantly higher in FY22 compared with previous years. The central government capex is projected to touch Rs 5.54 trillion next fiscal, while FY21 will close at Rs 4.4 trillion. The Centre, recognising the need for states to catch up next year and to compensate for lower tax devolutions this fiscal, will offer an additional Rs 2 trillion to them for their capital spending.
The sector that won big, though, is public infrastructure, including roads, ports, power, railways, and airports, with plans to speed up spending on greenfield projects and monetise operational brownfield ones. Sitharaman announced the creation of a new Development Finance Institution (DFI) to spearhead government spending in infrastructure. DFI will initially be capitalised with Rs 20,000 crore of government equity, allowing it to leverage debt of up to Rs 5 trillion to provide much-needed financing to the capital-starved sector.
In the December quarter, new project launches rose only 10.29 per cent over the preceding quarter and fell short of spending achieved in the year-ago period. Both public sector banks and the private sector have been wary of risking their own capital by committing to new projects at a time when consumer confidence has plummeted.The Centre seems ready to step in and fill this vacuum. Projects under the National Infrastructure Pipeline, a five-year programme to spend Rs 111 trillion on key infrastructure sectors, are likely to be speeded up.
Meanwhile, the Central bank is also working on procedural issues to launch its digital currency in the country soon. In the same interview with CNBC-TV18, he said there are benefits of blockchain technology, however, "there are some major concerns on the cryptocurrency that we have conveyed to the government."