In the fifth year of stability, the government is in search of growth. One basic ingredient for growth is investment—and that too in productive, preferably export-oriented, sectors. However, investment cannot be mathematically increased without a corresponding increase in savings, and there is no real focus on this.
Moreover, whatever investment is taking place—or could take place—is not primarily flowing into productive sectors. The question is how to correct this course. The government is trying to provide incentives in silos without undertaking meaningful economic reforms. These may attract some investment in a piecemeal manner but are unlikely to change the overall picture.
One incentive the government has recently announced is an increase in the interest-rate subsidy for exporters. The first measure is an expansion of export financing schemes, under which exporters will have access to up to Rs1.5 trillion—up from Rs1 trillion—at an interest rate of 8.5 percent. The second is a long-term export growth financing scheme, offering a fixed rate of 2 percent for the first two years and 5 percent for the remaining eight years. The third is a rebate on incremental exports.
