Industrial sector top priority, says trade body
By R. Chandrasekaran
CHENNAI: Just ahead of the meeting of the Prime Minister with industry leaders, the Federation of Indian Chambers of Commerce and Industry (FICCI) has called for reviving investment in India with a thrust to the industrial sector to be a top priority in the current situation.
Pointing out that fresh investments have taken a beating during the last few quarters since investors preferred to play defensive in the absence of clarity on several issues, FICCI President Naina Lal Kidwai said a turnaround in GDP growth is possible only if the industrial sectors performs to its potential in the coming months.
The trade body wanted the government to lift the business sentiment and also create a favorable environment by making its fiscal and monetary policies and the structural reforms work together so that investors would feel more confident about their investment in India.
The recent measures taken by the Reserve Bank of India came in for criticism as the FICCI said that the current liquidity situation is not at all comfortable and the central bank’s recent measures would tantamount to toughening the monetary policy. While the government has taken initiatives to relax foreign investment in various sectors in an effort to boost inflows to limit the weakening of Indian currency, it pointed out that domestic investments too are critical for a sustained growth and cannot be ignored.
The trade body has made it clear that unless a strong signal from the government and the RBI emerges on the reduction of interest rates, any up-tick in investments will be impossible in the current economic situation. It pointed out that its recent economic outlook survey was in favor of a cut in the policy rates between 50 and 75 basis points before the end of this current calendar year to bring back the growth pace.
The slow-down in the economic conditions has already hit recruitments and some of the sectors have already taken decision to layoff of its contractual staff. The current conditions will force them to layoff permanent employees too if the growth trajectory is reversed. Currently, the employment situation is seen as gloomy.
The FICCI president said, “It is extremely important to establish more stability on the external front. There is urgent need for long term action geared towards economizing imports of oil, coal, fertilizers, electronics and capital goods. Also, on the export side, merchandise exports have become increasingly price inelastic. Exports rise when global growth picks-up, but don’t respond adequately to depreciation of exchange rate. Exports revival has to be an integral part of our policy framework.”
The trade body also cautioned that as the fiscal situation is being monitored by the global rating agencies, the expected cost of implementing the program is likely to be big and may even cause slippage on fiscal front.
To contact the author, email to rchandrasekaran@americanbazaaronline.com