The Finance Ministry seems to have found the additional funds to boost the slowing economy by prodding public sector units (PSUs) to increase their capital spending by ₹25,000 crore this fiscal.
The assurance was given by all major Central PSUs, including the National Highways Authority of India and firms in sectors such as steel, power and petroleum, at a meeting with Finance Minister Arun Jaitley on Thursday, where they also promised to enhance their dividend payouts.
“During the review meeting, it became clear that all the PSUs are on track to meet the budgeted capital expenditure of ₹3.85 lakh crore for 2017-18. An additional ₹25,000 crore will be spent by them,” said Subhash Chandra Garg, Secretary, Department of Economic Affairs, after the meeting.
This will bring the spending by PSUs on a par with last fiscal, when the Budget and Revised Estimates were ₹3.98 lakh crore and ₹4.06 lakh crore, respectively.
The Finance Ministry also discussed the possibility of PSUs using their low debt to equity ratio and other instruments like Infrastructure Investment Trusts and monetising their assets to finance the capital expenditure.
Garg said a second review meeting is planned for November or December to ensure that the expenditure unfolds as pledged.
‘Liberal dividends’“The CPSEs that have free reserves and surplus cash were asked to consider declaring liberal dividends so as to promote more productive use of such resources for financing much-needed physical and social infrastructure,” said an official release after the meeting. Facing a slew of State elections from later this year and the general elections in 2019, the government has been keen to offset the impact of demonetisation and the rollout of the Goods and Services Tax, which slowed down growth in the first quarter to a three-year low of 5.7 per cent.
But with limited fiscal space, an all-out stimulus package to boost the economy has proved difficult.
However, Garg stressed that as of now, the Centre is confident of meeting its fiscal deficit target of 3.2 per cent of GDP in 2017-18.