Economic Survey 2017-18: Private investment to rise with NPA resolution, PSBs recapitalisation

Private investment seems poised to rebound with efforts being made for expeditious resolution of bad loans and adequate recapitalisation of public sector banks (PSBs), the Economic Survey said

PTI January 29, 2018 15:53:53 IST
Economic Survey 2017-18: Private investment to rise with NPA resolution, PSBs recapitalisation

New Delhi: Private investment seems poised to rebound with efforts being made for expeditious resolution of bad loans and adequate recapitalisation of public sector banks (PSBs), the Economic Survey said.

The government announced a large recapitalisation package of about 1.2 percent of GDP to strengthen the balance sheets of the PSBs, the Economic Survey 2017-18 tabled in Parliament said on Monday.

Last week, the government announced a slew of reforms for the banking sector and said it will infuse an unprecedented Rs 88,139 crore capital in 20 PSBs before 31 March to boost lending and revive growth.

Economic Survey 201718 Private investment to rise with NPA resolution PSBs recapitalisation

Representational image. PTI.

"As these twin reforms take hold, firms should finally be able to resume spending and banks to lend especially to the critical, but currently-stressed sectors of infrastructure and manufacturing," the pre-Budget survey said.

It noted that the private investment seems poised to rebound, as many of the factors exerting a drag on growth over the past year finally ease off.

"Translating this potential into an actual investment rebound will depend on the resolution and recapitalisation process. If this process moves ahead expeditiously, stressed firms will be put in the hands of stronger ownership, allowing them to resume spending.

"But if resolution is delayed, so too will the return of the private capex cycle. And if this occurs, public investment will not be able to step into the breach, since it will be constrained by the need to maintain a modicum of fiscal consolidation to head off market anxieties," it said.

Observing that another key determinant of growth will be the implementation of the Insolvency and Bankruptcy Code (IBC) process, it said timeliness in resolution and acceptance of the IBC solutions must be a priority to kick-start private investment.

The greater the delays in the early cases, the greater the risk that uncertainty will soon shroud the entire IBC process, it said.

"It is also possible that expeditious resolution may require the government to provide more resources to PSBs, especially if the haircuts required are greater than
previously expected, the ongoing process of asset quality recognition uncovers more stressed assets, and if new accounting standards are implemented," it said.

Updated Date:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Economic Survey 2017-18 wants govt to complete Air India sale by next fiscal
Business

Economic Survey 2017-18 wants govt to complete Air India sale by next fiscal

The Economic Survey on Monday suggested that the government should complete Air India disinvestment within the next financial year

Corporate India cheers Economic Survey 2017-18, calls for focus on human capital, agriculture
Business

Corporate India cheers Economic Survey 2017-18, calls for focus on human capital, agriculture

India Inc on Monday pitched for focus on rapidly improving human capital and agricultural productivity to sustain the economic growth trajectory, while cheering the GDP growth projection of 7-7.5 percent in 2018-19 laid out by the Economic Survey

NPA resolution: Vedanta assumes control of stressed Electrosteel; deposits Rs 5,320 cr in an escrow account
Business

NPA resolution: Vedanta assumes control of stressed Electrosteel; deposits Rs 5,320 cr in an escrow account

The National Company Law Appellate Tribunal (NCLAT) had allowed Vedanta Ltd to make an upfront payment of Rs 5,320 crore to lenders for acquiring Electrosteel Steels.