The Economic Survey,said the Government should work towards removing regulatory and bureaucratic impediments, and move towards a lower interest rate regime. It pinned its hopes on the newly-constituted Cabinet Committee on Investment (CCI) for dealing with the specific issues, which were holding back big investment projects in the country.
The Survey called for a lower interest rate in order to give a boost to the investment climate. Specific issues facing the infrastructure sector needed to be resolved to revive the investment climate and propel sustainable growth, it said. “In the current macro-economic environment there is a need to address sector-specific issues over the medium-to-long-term horizon in India. A high level of investment in the infrastructure sector is essential for the overall revival of investment climate,” it added.
The Survey said bank credit for major infrastructure projects had moderated to 16.57 per cent during the third quarter of the current fiscal, from the peak levels of 44.60 per cent in 2010-11. Within infrastructure, power had an over 50 per cent share in total credit flow but the growth had decelerated to 21.58 per cent during the October-December quarter of the current fiscal vis-a-vis a high of 48.19 per cent in 2010-11.
Telecom growth dips
It also noted that credit flow in the telecom sector had been falling for the last six quarters. Growth in telecom was down (-) 0.09 per cent in the third quarter of 2012-13, from 76.57 per cent in 2010-11. For roads and highways, growth in the bank credit had gone down to 18.11 per cent in the third quarter vis-a-vis a high of 33.27 per cent in 2010-11. As many as 258 projects were delayed, as of September 2012, out of a total of 566 projects, costing over Rs. 150 crore.
“The government is committed to fiscal consolidation. This, along with demand compression and augmented agricultural production, should lead to lower inflation, giving the RBI the requisite flexibility to reduce policy rates,” it further said.
It said India was caught in a vicious circle of falling growth and stimulus withdrawal. Also, the country's increased dependence on foreign borrowing was a cause for concern, it pointed out. It was imperative to shift the national spending from consumption to investment, remove bottlenecks to investment, growth, and job creation through monetary and supply-side measures, it said.