Stimulating demand in India through construction sector
Ajay Shankar writes in Financial Express: [...]The construction sector has a large multiplier effect and is labour-intensive. So, it is a natural choice. There are a large number of incomplete housing projects with developers in difficulty/bankruptcy. The FM had announced a financing package last year to mitigate the economic downturn. But progress has been slow. There were issues with the fine print of the sanction orders. A simple but bold approach could work immediately; a takeover of all the incomplete projects from the developers, and getting the banks to immediately provide financing for completion at current costs with a government guarantee, could work. A czar could be designated with a mandate to get actual work started within 45 days of the end of the lockdown, and completion within 18 months of the commencement of work.
Preparatory work for takeover, tying up finances and settling contractual terms with the construction agencies can be done now. This would not need budgetary outflows. As the economy recovers and demand for housing picks up later, then the land bank with the developers would become liquid assets and debt may be comfortably serviceable.
A step up in the ongoing affordable housing construction programme could also generate additional demand. The same would also apply to the rural road programme. The present crisis has highlighted the inadequacy of hospital care capacity. While efforts are on to create temporary additional capacity on a makeshift basis, there is a need to increase capacity by 25-50% on an urgent basis. This merits funding from the stimulus package. This would generate demand for the construction industry as well as for the supply of medical equipment and furnishings.
