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By Shivaji Sarkar<\/strong><\/p>\n \n Amid the critical Haryana elections, the Reserve Bank of India\u2019s concerns over infrastructure funding and new guidelines have sparked debate in political and economic circles about the state\u2019s health, poverty levels, and nationwide infrastructure challenges. The World Bank highlights corruption as a major obstacle to investment, warning that it deters investors and can lead to crises, as seen in Southeast Asia in 1997 and the global financial meltdown in 2007-08.<\/p>\n RBI Deputy Governor M Rajeshwar Rao says that infrastructure projects face high risks, complicating their financing. His statement coincides with the RBI\u2019s proposed new norm requiring banks to set aside 5 per cent of the loan amount, compared to 0.5 per cent. This could make project financing more expensive. The move is a sequel to many projects, including roads, seeking financing in parts for bigger projects and thus concealing the real nature of the loans. It also has some linkages to high debts of most of the states.<\/p>\n Between 2014-15 and 2022-23, scheduled commercial banks (SCBs) wrote off loans worth over Rs14 lakh crore. Nearly half of these were related to large industries and services. However, the total recovery was just over \u00b9 2 lakh crore. The NPAs being sold at discount to the bad bank or NARCL, set up two years ago, also couch the reality.<\/p>\n Since the pandemic, the Union government has invested heavily. Between 2019 and 2024, the Union government\u2019s share of investment in the economy rose by 226 per cent. In the same period, private investment rose around 54 per cent. Additionally, as a share of gross domestic product (GDP), there has been a significant fall in private investment from 27 per cent in 2010\u201311 to about 20 per cent in 2020\u201321. Chairman of the Prime Minister\u2019s Economic Advisory Council (EAC), Bibek Debroy, says that private investment has to rise as government has to reduce fiscal deficit.<\/p>\n Haryana alone is estimated to repay Rs 64,044 crore in debt in 2024-25, up from a net public debt of Rs 28,656 crore in 2019-20, as the infra push began. (The total outstanding debt of states account to over Rs 60 lakh crore). This is now putting a pressure on the state\u2019s functioning and possibly more borrowings. The rising deficit hits the state\u2019s welfare and development missions. This is despite an estimated GSDP of Rs 11.2 crore in 2023-24, 13 per cent increase from 2022-23. Its also a fact the GSDP now surged ahead of Punjab, which is projected to be Rs 6.98 lakh crore, a 9.5 per cent increase from 2022-23.<\/p>\n Haryana is among the leading states in terms of IT exports. Export of electric machinery and equipment for Haryana reached US $390.7 million in FY22 (until Feb 2022) and it was US $462.5 million in 2021-22. But there is a gap. Growth is limited to cities like Gurgaon and Faridabad. Development in other areas remains stymied.<\/p>\n Still worse Haryana\u2019s overall living standards have not increased as much as its GSDP. It is pointed out that urban monthly capital expenditure (MPCE) has fallen in both rural and urban areas during the last ten years. Unemployment at 11.2 per cent for men and 17.2 per cent for women in April to June 2024 according to a Central government report, leads to around 46,102 graduates and postgraduates applying for the jobs of contractual sweepers. The Household Consumption Survey 2022-23 states that the bottom 70 percent of the population has far lower MPCE (spending) than in Punjab.<\/p>\n The malaise is widespread. Public sector banks in India are doing better in comparison to their private sector counterparts in terms of non-performing assets, a survey conducted by industry body FICCI and banking association Indian Banks\u2019 Association (IBA) found. However, the survey found that lenders expect high NPA levels in the infrastructure sector in the next few months. The present NPAs are at 3.9 per cent.<\/p>\n Parliament was informed on August 7, 2023 that banks have written off bad loans worth Rs 14.56 lakh crore since 2014-15. The system-level capital to risk-weighted assets ratios in March 2024 \u2014 under the baseline, medium and severe stress scenarios \u2014 are projected at 16.1 per cent, 14.7 per cent, and 13.3 per cent, respectively. This is an indicator that infra spendings, mostly out of borrowings from banks, have their problems.<\/p>\n As banks increased provisions for NPAs, their ability to extend fresh credit reduced sharply. Credit growth in the industrial sector, particularly large industries, declined. According to RBI data, the growth rate of bank credit to industry fell from 7 per cent in 2015 to a negative 1.9 per cent in 2017.<\/p>\n The credit crunch contributed to a significant decline in private sector investment. Gross Fixed Capital Formation (GFCF), a measure of private investment, showed a decelerating trend, reflecting reduced private investment. Private investment growth rate slowed from 6.1 per cent in 2014\u201315 to around 2.9 per cent in 2017\u201318, according to RBI Governor Shaktikanta Das. India faces a number of challenges in infrastructure development, including on quality roads. The country\u2019s infrastructure financing gap is estimated to be more than 5 per cent of GDP.<\/p>\n Land acquisition is difficult and time-consuming. Recently Ayodhya aerocity programme was shelved owing to land issues. Transport infrastructure is poor and requires continuous funding. Some government rules like scrapping of vehicles after ten years created immense problems for private transporters. It has even hit private citizens and transporters in Haryana, Uttar Pradesh and many other states.<\/p>\n The World Bank and RBI say that private investment has not matched public investment and is a great drawback. India\u2019s infrastructure deficit is a key factor that hinders its ability to sustain high economic growth. Globally infra funding becomes unviable as it needs estimated $3.9 trillion annually and governments lack funds.<\/p>\n The World Bank has a number of strategies to help developing countries. Its tools like the Infrastructure Sector Assessment Program (InfraSAP) and Beneficial Ownership Registers (BORs) help governments for improving infrastructure performance. The World Bank has implemented BORs in Nigeria, North Macedonia, Kenya, and the United Kingdom. It also mobilises private sector funds.<\/p>\n The latest RBI moves are somewhat aligned to this concept. The National Bank for Infra Development (NaBFID) would raise Rs 90,000 crore from the capital market shortly. Debts of Haryana and other states to increase and now they may have to take it from NaBFID at higher rates. The RBI freebies for states may be over. These may become serious issues in the state poll. \u2014 INFA<\/p>\n","protected":false},"excerpt":{"rendered":" State Polls Bare Infra Risks By Shivaji Sarkar Amid the critical Haryana elections, the Reserve Bank of India\u2019s concerns over infrastructure funding and new guidelines have sparked debate in political and economic circles about the state\u2019s health, poverty levels, and nationwide infrastructure challenges. The World Bank highlights corruption as a major obstacle to investment, warning […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":{"0":"post-248688","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-features"},"_links":{"self":[{"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/posts\/248688","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/comments?post=248688"}],"version-history":[{"count":0,"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/posts\/248688\/revisions"}],"wp:attachment":[{"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/media?parent=248688"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/categories?post=248688"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/arunachaltimes.in\/index.php\/wp-json\/wp\/v2\/tags?post=248688"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}