High interest rates hurting investment cycle

Former chief executive of ICRIER,Rajiv Kumar was appointed as the secretary general of industry chamber Ficci.

Former chief executive of ICRIER,Rajiv Kumar was appointed as the secretary general of industry chamber Ficci on Monday. Taking over the reins from Amit Mitra who was with the organisation for over 16 years,Kumar has already worked out his key priorities. In a conversation with Surabhi,he discusses how inflation and high interest rates are hurting investor confidence. Excerpts:

Interest rate hikes will impact manufacturing sector. Do you plan to take this up with the government?

If interest rates continue to rise and capital continues to become costly,then clearly investment will go down. We are hoping that the government can lower its revenue deficit quickly so that even if RBIs interest rates dont come down,it will not translate into very high market interest rate. Our fear is that the investment cycle is turning downwards,which will hurt investor interest. We have been talking to finance ministry on the issue.

As an industry chamber,are you concerned by the recent issues of corruption that may also hurt investor interest?

Of course,we are concerned. While till now there has not been much weakening in investor confidence,the fear is that it may happen. There is a decline in FDI,which is partly because of some decline in foreign investors confidence. Also,non food credit off-take has been a little sluggish.

What are your views on mandatory job reservation for people from scheduled castes and tribes in private sector?

I strongly believe in making the less fortunate equally capable by giving them access to education through scholarships as well as better health facilities. But mandating job reservations is something that all chambers have said will adversely affect the industrys competitiveness. But we will try to advise our members to give a preference to persons belonging to SC/ST.

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What is your view on the growth versus environment debate?

There is no trade-off between development and environment. Companies like ITC have shown that you can improve your bottom line by green initiatives. But it can become a problem if we impose environmental norms in a ham handed manner without any sensitivity to industrys needs. The only area where environmental norms have become a problem is mineral resources and their exploitation. Here,the government should ensure that companies that have the best technology and the best record for rehabilitation are encouraged to come to the sector,rather than leave the door open to unorganised people who only do slaughter mining.