CII demands 1% rate cut, reform measures to boost growth
New Delhi: Industry body CII Monday pressed for one percent cut in interest rates by the Reserve Bank to attract investment and demanded more reform measures to accelerate economic growth.
CII's newly elected President Kris Gopalakrishnan said to revive economic growth and to take the expansion rate to 8-9 percent in the next two years it is essential to kick start investment. Early implementation of Goods and Services Tax (GST) and Direct Tax Code (DTC) is also important, he added.
"The RBI needs to work in tandem with the government in boosting growth by easing interest rates by at least 100 bps in the current fiscal. Steps like early implementation of GST would help in adding 1-1.5 percent in the GDP," he said.
Concerned over stubborn inflation, RBI had been keeping a tight leash on its monetary policy. It cut its key rates after a gap of nine months in January this year.
Meanwhile, inflation fell to a over three-year low of 5.96 percent boosting hopes of a rate cut.
Gopalakrishnan said supply side constraints is the main reason for inflation and reduction in interest rates would help in enhancing investments and increase in boosting capacity.
"There are certain things which we can do at the domestic level to boost economic growth. We can not do much (to improve) the external factors," he told reporters here.
On GST, he hoped that the amended constitutional amendment bill will be placed in Parliament in the monsoon session.
Gopalakrishnan, an, who is also Infosys Executive co-chairman, stressed the need for the Cabinet Committee on Investment (CCI) to aim for making a repository of the top 50 stalled projects in terms of the investment incurred and go for their revival on a priority basis.
"Streamlining procedural reforms is another major step for India to catapult itself to the high growth trajectory," he added.
As per the CSO estimates, Indian economy is expected to grow by 5 percent, the lowest rate in a decade, due to poor performance of manufacturing, agriculture and the services sector. In the third quarter ended December 2012, the GDP grew by just 4.5 percent.
For the current fiscal, CII has projected a growth rate of 6-6.4 percent.
Gopalakrishnan asked the government to allow FDI in critical sectors such as insurance, banking and pension funds.
He also called for review mechanism for existing free trade agreements. "The mechanism would assess the impact of these FTAs on the domestic industry," he said adding on the India-Eu pact, "some concerns have been raised and we will work with the government (on those things)".
India is negotiating a comprehensive free trade pact with EU since June 2007. The country has implemented such pacts with Asean, Korea, Malaysia, Thailand, Singapore and Japan.
On governance, he said that there is need for independent regulatory authorities in sectors of scarce resources like coal, real estate and health.
Gopalakrishnan said to accelerate growth there is an urgent need to focus on - reforms and governance; inclusive growth and affirmative action; innovation entrepreneurship and growth of MSMEs; transformation of sectors.
He also pressed for electoral reforms and asked for implementation and immediate enforcement of the recommendations of the Election Commission, Law Commission and judiciary in respect of candidate?s disqualifications at entry threshold.
"We have to push for all the electoral reforms. I know that all of them are not going to come but I am hopeful that some of our proposals will be implemented. Synchronise elections so that we do not have elections every year," he said.
Further, he said slowing manufacturing sector deserves special attention besides there is aneed to establish independent regulatory authorities in sectors like coal, real-estate and health. "Separate regulatory authorities dealing with pricing, allocation, licensing and tariffs in areas such as power and telecom".
Calling for speedy implementation for National Manufacturing Policy by converging land acquisition, project clearance, including environment and streamlining regulations, he said that labour reforms would help in creating employment.
In Infrastructure, an independent PPP Commission with authority and jurisdiction to renegotiate terms of contract, access to financing, effective dispute resolution mechanism are required. Address fuel (coal and gas) shortages in the power sector besides accelerating oil and gas exploration and production in the country.
"CII will set up a task force to recommend a strategy to improve the business regulations in India. Besides, we will create linkages between manufacturing sector and academia for attracting talent for manufacturing and encouraging R&D and innovation," he added.
For agriculture, he suggested reforms to incentivize implementation of the Model APMC Act and promote mechanisation and long term policies to encourage private sector participation in procurement, storage and distribution of food-grains.
On the CII's agenda for innovation, he stated that the industry investment in R&D, innovation and design needs to increase significantly.
CII will launch 'Project Village Budha' to take the idea of kaizens (small improvements) and enable implementation in a village environment.
"Its objective would be to help earning power of people in the villages through a structured programme for large, medium and small companies from all sectors," he said adding a special programme for MSMEs, the Golden Top 100 SMEs will be launched this year.
On corporate social responsibility (CSR), he said CII would expand its scholarships and vendor development programs.
The chamber will also set up three sector skill councils, four skill hubs and 17 CII-PanIIT skill gurukuls to take forward its wide range of skills efforts.