Hardening interest rates on top of India Inc’s wishlist for FM meet

The prolonged volatility in the stock market, rising interest rates and inflation, as well as flexible labour policy are some of the major issues...

The prolonged volatility in the stock market, rising interest rates and inflation, as well as flexible labour policy are some of the major issues that will be deliberated upon in the meeting between the Finance Minister and the three apex chambers—Ficci, CII and ASSOCHAM—on July 5.

The meeting, which had been called by Chidambaram seeking recommendations from the industry bodies to enable manufacturing sector attain a 12% rate of growth, has already been deferred twice. Its agenda has also been extended to cover the whole of the industrial sector and the FM is expected to make some announcements based on the recommendations after the July 5 meeting.

Market volatility, hardening of interest rates leading to liquidity problems, and the impact of oil price hike on inflation, top the priority list of the industry bodies.

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Confederation of Indian Industries (CII), for one, is of the view that unlike last year, striking a healthy balance between liquidity, inflation and growth will be more difficult on account of spiralling fuel prices and changing domestic and global macro economic conditions.

Ficci has called for accelerating financial sector reforms to reduce cost of capital to global levels while advocating measures to ensure better flow of credit to SMEs. Similarly, ASSOCHAM is in favour of a suitable SME policy, replacing the current SSI policy with a provision for 100% FDI through automatic route for SMEs.

CII is also likely to raise issues concerning slowdown in the mining sector and the adverse impact of hardening of interest rates on the overall economy. CII President R Seshasayee in an earlier interaction had said that ‘‘The mining sector needs to be opened to investments and competition and the overt state dominance has to be reduced.’’ The chamber has also pointed that growth in the mining sector went down to 3% in Q4 2005-06 from 3.7% a year back and the sector’s sluggishness is a major cause for concern.

The three chambers will also lobby for flexible labour laws on the lines of the ASEAN countries. Ficci has recommended that some of the elements of the National Rural Employment Guarantee Program like industry providing employment guarantee for a minimum 100 days, should be implemented in labour intensive sectors. ASSOCHAM and CII also favour labour reforms for employment generation and investment promotion.

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Ficci has also recommended an Exim policy which uses drawback rates for neutralisation of taxes on goods and services and a renewed thrust on research and development with long term tax breaks.

Further it has also called for creation of world-class infrastructure and reform in land laws across all states to facilitate faster acquisition, usage and transfer.

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