New Delhi– The government decision to infuse Rs 2.11 lakh crore in public sector banks and spend Rs 14 lakh crore on infrastructure projects has received the thumbs up from India Inc.

“The decision to invest in PSU (public sector undertaking) bank recapitalisation should result in increased lending, especially to the MSME (micro small and medium enterprises) sector,” said Pankaj Patel, President, Federation of Indian Chamber of Commerce and Industry (Ficci).

He said Ficci hoped that the Reserve Bank of India will also pro-actively seek to boost investment and consumer demand through an easing of the repo rate.

Bank recapitalisation should also encourage banks to pass on the benefits of a lower rate of interest to investors and consumers.

Welcoming the emphasis placed by the Finance Minister on increasing public spending, Patel said the government can afford to ease the fiscal deficit to GDP ratio from the stated 3.2 per cent to 3.5 per cent without any serious negative macro-economic consequences.

Announcement of recapitalisation of public sector banks (PSBs) to the tune of Rs 2.11 lakh crore along with a booster dose of Rs 14 lakh crore expenditure will prove to be a mega turnaround point for Indian economy which was tackling issues out of GST and demonetisation, said D.S. Rawat, Secretary General, Assocham.

“The bank recapitalisation would lead to a massive sentiment turnaround as the decision by the Union Cabinet … is a great enabler for PSBs to resume lending, especially to small and medium enterprises (SMEs) which are in immediate need for funding,” he said.

A whole lot of infra industries like cement and steel would get a boost. Besides, it would also generate jobs at informal levels of the economy and generate demand at the bottom of the pyramid.

“These measures would surely set the stage for revival of the private sector investment,” said Rawat. (IANS)