PM Modi calls for innovating financing models to spur growth
Prime Minister Narendra Modi said on Tuesday that recovery is again gathering pace after the ‘once-in-a-century’ crisis caused by the pandemic and called on financial institutions to consider innovative financing models to support the growing credit appetite of the fast-recuperating economy.
As the government strives hard to ensure the safe return of Indian medical students stuck in Ukraine’s war zone, the Prime Minister stressed the need for more medical institutions in the country. “Can our financial institutions and banks prioritise this in their business planning?” the Prime Minister asked.
Addressing a webinar on ‘Financing for Growth & Aspirational Economy’, Modi said: “We have done many fundamental reforms and made new schemes to strengthen MSMEs. The success of these reforms is dependent on strengthening their financing.”
He asked financial institutions to identify some 8-10 critical and emerging sectors, including constructions, start-ups, drones, space and geospatial data, and support them through a credit push.
Modi also highlighted green financing as the ‘need of the hour’ in order for the country to realise the target of net-zero carbon emissions by 2070.
The webinar, organised by the finance ministry, was attended by representatives of over a dozen critical ministries, Niti Aayog, Capacity Building Commission, state governments, financial-sector regulators like RBI, Sebi, IFSCA and IRDAI, and various sectoral experts. It’s aimed at firming up strategies to implement key Budget proposals, especially on infrastructure creation, effectively.
The PM has been repeatedly calling on bankers to step up lending without fear and help spur growth. In November last year, his exhortation came with a pledge, as he offered to stand as a ‘wall’ to defend those bankers who might commit honest business errors, amid fears that bankers were increasingly turning risk-averse.
Non-food bank credit growth slowed to 8.3% in January in the wake of the Omicron spread, against 9.3% in the previous month, though it remained higher than the 5.9% a year before. However, credit to industry grew at a slower pace of 6.4% in January, even on a favourable base.
The next big industrial revolution (Industry 4.0), the Prime Minister said, is not possible until the country moves substantial progress in areas like fintech, agritech, meditech and skill development.
He highlighted a raft of reforms undertaken by the government in recent years to bolster growth. These include the move to encourage foreign capital flows, trim tax on infrastructure investment, create institutions like NIIF and a new development finance institution.
“Our financing sector will have to consider innovative financing and sustainable risk management of new futuristic ideas and initiatives,” the PM said.
To ensure that the ongoing economic recovery takes root, the Centre has budgeted a 36% jump in its capital spending to a record `7.5 lakh crore for FY23 from the revised estimate for FY22 (excluding capital infusion into Air India), with particular focus on infrastructure creation. Its capex next fiscal will more than double from the pre-pandemic (FY20) level.
The Budget has projected a real growth rate of about 8% for the next fiscal. This is in sync with the growth rate of 8-8.5% projected by the latest Economic Survey and is close to the central bank’s forecast of 7.8% for FY23. The National Statistical Office has forecast 8.9% growth for the current fiscal after a 6.8% contraction in real GDP in FY21 in the wake of the pandemic.