The Centre announced a .Rs 2.1-lakh-crore capital infusion plan for state-owned banks and an ambitious road development programme to boost the economy, which it said was "poised for takeoff" after short-term disruption caused by structural reforms.
Banks burdened by bad loans will get .Rs 1.35 lakh crore from bonds, .Rs 18,000 crore from the Budget and raise the remaining.Rs 58,000 crore through share sales. Fitch Ratings estimates India's banks will need nearly $65 billion in bank capital by March 2019.
The capital infusion programme that seeks to clean up banks' books and get them to lend more, will run over the current fiscal and the next and will be bolstered with further reforms to make lenders more accountable.
Credit growth at the end of September was 7% compared with 10% a year ago. Bolstering this is key to lifting private investment so as to revive growth.
The Rs 6.92-lakh-crore, five-year roads programme approved by the cabinet on Tuesday, which includes the Bharatmala project, seeks to generate 142 million mandays of work and addresses one of the biggest criticisms against the government — that not enough jobs are being created.
Finance minister Arun Jaitley said the measures evolved after detailed discussions within the government as well as with Prime Minister Narendra Modi. India's economy is projected to slow to 6.7% in the current fiscal, according to the International Monetary Fund, after first-quarter growth dropped to a three-year low of 5.7%.