India Inc for Rate Cut to Spur Investment
NEW DELHI:To take stock of the global economic situation, Prime Minister Narendra Modi had a nearly three-hour long meeting with the country’s top industrialists, bankers, economist and bureaucrats on Tuesday.
Addressing a press conference after the meeting called to discuss ‘Recent Global Events: Opportunities for India’, Finance Minister Arun Jaitley said that the Prime Minister has asked industry captains to take more risks and increase investments and reiterated the government stand on the economy that India will remain relatively untouched by the current global turmoil.
“The Indian economy will be a less-affected economy, because our own fundamentals are reasonably strong, and also, it’s an opportunity for us being an importer of oil commodities, which are the most affected market globally to build upon that situation,” Jaitley said.
The Finance Minister said the participants, 27 of whom spoke, felt the global situation, especially the volatility in the capital and currency markets, is a transient phase and that steps should be taken to strengthen the real economy.
The Prime Minister also urged the industry to focus on creating more jobs by boosting spending and attracting global capital with improving ease of doing business. However, the industry leaders demanded an interest rate cut to bring down cost of funds to boost capital spending.
Policy makers at the meeting suggested renewed focus on the agricultural sector with increased expenditure on irrigation and emphasis on food processing, will impact the performance of other sectors.
The Finance Minister said issues of ease of doing business, cost of labour and capital and stalled projects were also raised by participants at the meeting. Participants specifically emphasised on two steps — bankruptcy code and anti-corruption — and many of them wanted monetary policy easing by the Reserve Bank of India, Jaitley said, adding bankruptcy code was in the final stages of drafting.
The participants underlined the need to use the current global environment to ensure long-term energy security through suitable policy interventions. They stressed on the need to create a viable ecosystem for start-ups and self-employment to flourish.
The Prime Minister laid emphasis on SMEs and using MNERGA funds as a possible tool for skill development and using Mundra Bank for supporting unorganised sector.
Commenting on the outcome of the meeting, CII president Sumit Mazumder said, “The PM has said that industry must take risk and increase investments...we must go out and invest. Industry has a role to play.”
“The Prime Minister said this is an opportunity for us to take advantage and invest...cost of capital is too high but I don’t know how many people can go ahead to take risk and invest... many of us raised the issue of interest rate,” Ficci president Jyotsna Suri said.
Assocham president Rana Kapoor said, “Improving flow of credit, derisking and de-stressing public sector balance sheets, improving overall lendable resource of the banking system, innovation and entrepreneurship are the major areas on which PM is emphasising frequently.”
Commenting on the broad economic outlook, chief economic advisor Arvind Subramanian said a presentation was made to the Prime Minister about recent global economic events and the impact they may have on India. The CEA said recent developments in China will not impact India in a major way, that India continued to remain “one of the most attractive investment destinations globally and that cheap oil would be beneficial for the country.”
Minister of State for Finance Jayant Sinha said the government’s job is to clear hurdles and roadblocks towards growth and towards investments. “We are working on that,” he said.
While the participants felt large number of taxes matters have been resolved, balance of reforms including passing of GST must be carried out. “They expressed hope that GST which was held up because of Parliament obstruction would move forward,” Jaitley said.
Reliance Industries Chairman Mukesh Ambani, Tata Group head Cyrus P Mistry, Aditya Birla Group head Kumar Mangalam Birla, Sunil Bharti Mittal of Bharti Airtel and ITC chief Y C Deveshwar were among the industry leaders who attended the meeting.
GAIL India Chairman B C Tripathi and BHEL chief B Prasad Rao too were present.
RBI Governor Raghuram Rajan, ICICI Bank CEO Chanda Kochhar, SBI Chairman Arundhati Bhattacharya and economists like Subir Gokaran as well as Niti Aayog vice chairman Arvind Panagriya were also present at the brainstorming session.
■ Interest rate cut
■ Revival of stalled projects
■ GST reforms
■ Bankruptcy code
■ Definition of corruption
■ MNREGA scheme as tool for skill development
■ Mundra Bank for supporting unorganised sector
FM Leaves it to RBI
On the industry's demand for an interest rate cut, the Finance Minister said it was the domain of the Reserve Bank to set monetary policy. "There was no discussion on timeframe or any such thing. Neither did the Governor say this nor was this an opportunity to say this," Jaitley said.