Future investment flagging: CII

In an attempt to gauge the industry8217;s perception of the current economic situation with inflation riding at a 16-year high and industrial production losing its pace, finance minister P Chidambaram met members of industry body Confederation of Indian Industry CII in a closed-door meeting here today. Speaking to the media, CII president K V Kamath said that the three key areas addressed were the slowdown in consumer demand, the constraints being faced by the industry in terms of high input costs and interest rates and the overall investment plans.

Kamath added that though the industry was going to continue with its planned investments, future investment plans of India Inc were likely to be impacted as a result of higher cost of borrowing and chances of consumer demand slowing down. 8220;While the existing investments in the pipelines were being adhered to, newer projects which were at the backburner may not come to the front burner.8221; At present, investments in the pipeline are to the tune of around 700 billion planned over the next three years. He said investors were concerned whether high inflation would mean that consumer demand would slowdown, whether high interest would mean that consumers could afford to buy or purchase what they wanted to purchase.

He, however, quoted the finance minister as assuring the industry that they 8220;should look at it very positively that an 8-9 per cent growth is here to stay and this is backed by numbers8221;. Kamath said Chidambaram reported figures from CMIE, which talks of a monthly accretion to new projects to the tune of Rs 150,000-170,000 crore that would be around 40 billion, which, on an annualised basis, would be 450-480 billion.

Addressing the problem of higher cost of borrowing as a result of monetary tightening measures taken by the central bank, Kamath said that given the high rate of inflation, it was important for the RBI to act in that direction and even now the real rate of interest was not very high.

On dismal industrial output performance in the first quarter of this fiscal, he said he would not interpret these numbers as they were inconsistent with what was being invested either at the top level or at the bottom line and did not project any marked trend. CII expects growth to be in the range of 8-8.5 per cent this fiscal.