Infrastructure loans by banks as a proportion of non-food credit went up from a mere 1.1% in 1998 to 15.4% currently. Note that these very long gestation loans are not very suitable for banks and give rise to asset-liability mismatches. Nevertheless, in the absence of alternatives, public sector banks were pressed into service to fund infrastructure. The rest of the story is well known—lack of feedstock, inability to hike power tariffs, rampant crony capitalism and flawed policy all combined to stall these projects. The PPP model fell into disrepute. The wheel has now come full circle and it is the banks that have been left holding the can. But these are public sector banks and in the ultimate analysis, the burden will have to be borne by the taxpayer. livemint/Money/PKAhqoYMIcnDnXgJawfdOK/How-the-govt-used-bank-funds-as-a-substitute-for-public-inve.html high fiscal deficits are counter-productive in the Indian context. The inability to improve the tax-to-GDP ratio was another reason. The rise in subsidies in recent years, too, left precious little resources for infrastructure. Subsidies as a percentage of total expenditure went up from 11% in 1991-92 to 18.2% in 2013. Over the same period, capital expenditure as a proportion of total expenditure went down from 26.1% to 11.8%, as the chart shows. But it wasn’t just that the proportion of capital expenditure went down—central government expenditure as a percentage of GDP fell from 17.96% in 1990-91 to 13.94% in the 2014-15 budget.
Posted on: Mon, 22 Dec 2014 22:49:18 +0000
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