With global meltdown and asset quality in banking system not looking too bright, the large government spending programme is likely to result in credit being denied to productive sectors of the economy when it is most needed, according to former Securities and Exchange Board of India Chairman M Damodaran.
The 'risk averse banking system' was giving thrust to only one borrower-Government of India, Damodaran said delivering the 10th Malayala Manorama Budget lecture series here last night.
He said increased allocation in the budget for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) project was a 'huge positive' step forward. Urban renewal was something successive budgets had ignored and allocation for urban infrastructure was one of the most positive things in budget, he said.
'Even lip service has not been paid to urban renewal for several years.It is only during the last few years that urban renewal is getting some attention',Damodaran said.
The 'pathetic' state of Indian cities and towns was due to inadequate investment by local bodies that had neither the ability nor the willingness to raise the resources, he said.
Referring to Finance Minister P Chidambaram's statement that government intends making the country slum free in the next five years, Damodaran said too much of resources were not required to address the problem of discontinuing slums. 'But what is needed is political and administrative will power'.