Raghav’s Take: Big Idea 5-Step up Investment Rate in the Economy

Raghav Bahl gives you his 5 big ideas for the PM to focus on in his second year.

Raghav Bahl(inset) tells you his 5 big ideas for the PM to focus on in his second year.

As the Prime Minister starts the second year of his term, Raghav Bahl expands on his 5 big ideas for Narendra Modi to focus on. So what can Prime Minister Modi do to quickly increase investments?

Watch Raghav’s Take.

Big Idea 5: Step up the Investment Rate in the Economy

Perhaps the biggest drag on India’s economic growth is the low and - hold your breath - falling investment rate in our economy.

For a low income country, which is so woefully short of infrastructure and industrial capacity, a falling investment rate is like cutting off the oxygen supply to a patient on ventilator support. So what can Prime Minister Modi do in his second year to quickly increase investments?

One – lean on RBI to cut interest rates; but Two, he should take a leaf out of China’s and Singapore’s book by setting up a China Investment Corporation and Temasek like Sovereign Fund, which could raise half a trillion dollars “off” the government’s balance sheet.

One of the first actions of this Fund could be to provide a temporary, say 7 or 10-year, line of Equity Financing to over Rs 6 Lac Crore worth of stalled Public/Private Infrastructure Projects; it could re-capitalise PSU Banks, which need nearly Rs 5 lac cr of Equity Financing to wash the red ink off their balance sheets; it could give Rs 2 lac cr to the railways to modernize, etc.

Along with this, he should upgrade and amend the Bankruptcy Law so that errant or out-of-cash promoters lose control of stalled projects, which are transferred to viable new owners – and if he needs to do this by promulgating another Ordinance, so be it!