Saturday, April 27, 2013

"Stagnancy in reforms is the top concern for most firms"

Director General, CII, discusses the general sentiment within India Inc. And the steps to be taken for revival with K. S. Narayanan of B&E

B&E: What is the general mood of India Inc. especially after the RBI not approving a rate cut? What is your view on RBI’s concerns related to inflation at present?
Chandrajit Banerjee (CB): India Inc. is unhappy with the RBI’s decision not to cut rates. It is not able to understand the RBI’s lack of concern about economic growth. CII believes that inflation is being driven by two factors. The first is the supply-side bottlenecks in the agricultural sector as a result of which food prices are rising especially for perishables. The second factor is the rise in the price of international commodities. Keeping interest rates high will not tackle any of these factors.

B&E: What are India Inc.’s key expectations in terms of reforms that can bring back growth in manufacturing and services?
CB: I would like to highlight two key reforms that would help bring back growth in manufacturing and services. Implementation of GST would rationalize the indirect tax structure and has the potential to raise India’s GDP growth rate by 1-1.5%. The other reform is to allow FDI in multi-brand retail, which will not only bring in investments and create jobs but also deal with the inflation problem.

B&E: Assuming the current scenario continues in terms of policy measures, what is your outlook on growth returning to 7% plus levels?
CB: If the current scenario continues, it will be hard for growth to return to 7% plus. However, we will continue to raise these issues with the government and hope that they will be resolved sooner rather than later.

B&E: Data on cash being retained by companies seems to indicate relatively lower risk appetite. What are the major factors affecting confidence and denting investment prospects?
CB: CII’s 79th Business Outlook Survey conducted earlier this year revealed that stagnancy in reforms is the top concern of most firms, followed by high interest rates and high raw material costs.

B&E: How is the situation back home influencing India Inc’s decisions w.r.t. investing in overseas markets?
CB: Indian companies will invest wherever opportunities arise and the business climate is positive. Indian companies are trying to diversify out of the traditional markets of US and Europe; and seeking destinations such as Middle East, ASEAN, Africa and Latin America. At the same time, developed markets will continue to be attractive, especially at current depressed valuations.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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