Govt seeks to leverage forex kitty
The government is toying with the idea of moving a constitutional amendment in the winter session of Parliament to get the mandate to borrow dollar funds from the RBI for undertaking the infrastructure projects.
Planning Commission sources said huge forex reserves of over $122 billion would have to be leveraged to improve the infrastructure, especially in rural areas.
While banks and financial institutions are willing to support the urban projects in ports, telecom and aviation sectors, they were not favourably inclined to take up projects in rural areas in sectors like roads, healthcare, education and agriculture which may not be bankable.
Yojana Bhavan will shortly move the PMO proposing a constitutional amendment that will enable the government to borrow dollar funds from RBI. Under the current dispensation, it can only access the rupee funds.
The proposed constitutional amendment will give a fillip to Planning Commission Deputy Chairman Montek Singh Ahluwalia’s proposal to leverage forex reserves for developing infrastructure.
“At the current pace, we will take at least 25 years to connect villages with roads and provide electricity in interior hamlets,” said a Planning Commission official.
According to indications, the finance ministry is unwilling to allow use of forex reserves for infrastructure projects. Borrowing from RBI is bound to increase the fiscal deficit. Finance Minister P. Chidambaram is left with very little elbow room to contain fiscal deficit given the recent surge in oil prices leading to duty cuts twice on petroleum products. This has resulted in a revenue loss of Rs 4,435 crore.
Meanwhile, addressing the economic editors on Thursday, Ahluwalia said the mid-term appraisal of the plan would focus on providing policy thrust to achieve an annual GDP growth of 7-8 per cent.
The thrust of this strategy will be to double agriculture growth to 4%.