Domestic as well as overseas investments have plunged in the recent quarters due to high interest rates and widespread corruption in the general administration, says chief of a leading industry chamber.
New Delhi: Domestic as well as overseas investments have plunged in the recent quarters due to high interest rates and widespread corruption in the general administration, says chief of a leading industry chamber.
"The lacklustre investments and slowing industrial growth are already showing the impact on employment situation. Job generation is one of the biggest concerns for the country, given the addition of 10-12 million new workers every year to the workforce," Federation of Indian Chambers of Commerce and Industry (FICCI) president Naina Lal Kidwai, said.
Kidwai said that she along with other industry leaders would raise these issues during their meeting with Prime Minister Manmohan Singh Monday.
"Meeting with the prime minister will largely be centred on handling the external situation and slowing industrial growth. The foremost issue that we need to highlight is need to kickstart the investment cycle," she said.
Kidwai, also the country head in India of London-headquartered HSBC, said high interest rates and corruption were the major reasons for the slowdown in investments.
She said the Reserve Bank of India (RBI) should take into account the sluggishness in industrial growth while deciding on policy rates. The central bank is scheduled to announce a monetary policy review Tuesday.
"Any increase in interest rates at this juncture will be a major blow to the industry and overall growth," she said.
Leading industrialists and representatives of business chambers, including Kidwai, are scheduled to meet Manmohan Singh at his official 7, Race Course Road residence Monday to discuss the issues affecting the country's economy.
Referring to Centre for Monitoring Indian Economy (CMIE) data, Kidwai said investments in new projects during the quarter ended June 30, 2013, was just one-third of what was recorded in the same quarter last year.
Total investments in new projects in India slumped to Rs.77,463.4 crore in April-June quarter as compared to Rs.222,659.8 crore recorded during the corresponding quarter of last year, according to data compiled by Mumbai-based think-tank CMIE.
"It has become extremely important to trigger domestic investments," she said.
Kidwai said the government must provide a conducive business environment in order to revive investments and growth.
"India has a very low rank as far as ease of doing business is concerned. For instance, transfer pricing today is one of the most contentious tax issue in our country with 70 percent of the world's transfer pricing litigation emanating from India," she said.
Kidwai said corruption was having an adverse impact on India's investment image and it was having detrimental impact on the economy.
According to a joint study conducted by FICCI and Ernst and Young, 83 percent of industry people feel that the recent spate of scams will negatively impact foreign direct investment inflows into the country.
FDI inflows in India slumped by 38 percent to USD 22.4 billion in 2012-13 as compared to USD 35.1 billion recorded in the previous year, despite the much-touted reform measures in the areas like retail and aviation, as per the department of industrial policy and promotion (DIPP) data.
Kidwai said the recent macro-economic data indicates that the Indian economy was in a "very difficult situation".
India's economic growth slumped to a decade's low of five percent in the financial year ended March 31, and the country's current account deficit hit a record high of 4.8 percent.
Indian rupee also hit a record low of 61.21 against the dollar earlier this month.
Kidwai said the current account deficit was likely to remain above four percent in the current financial year.
"This is a very difficult situation. It is important that we think of ways to economise our imports, especially for commodities like oil, coal, electronics and capital goods. In addition, exports would also have to be made more competitive," she said.