We can live with 8-9 inflation

At a time when many monetary economists,including former RBI governor Y V Reddy,are of the opinion that the central banks policy actions have invariably lagged and what the country now needs is low inflation even if it means low growth.

At a time when many monetary economists,including former RBI governor Y V Reddy,are of the opinion that the central banks policy actions have invariably lagged and what the country now needs is low inflation even if it means low growth,CIIs new president B Muthuraman tells The Indian Express that we can live with 8-9 per cent inflation. Excerpts::

Is there a case for further tightening of the monetary policy to rein in inflation?

Reserve Bank of India has tightened the monetary policy eight times in the past one year by about 200 basis points. Excessive tightening can act as a deterrent to investment. If investment is low,it will lead to lower production which may in turn cause inflation in the long run. What is required to tame inflation are structural changes such as strengthening the supply chain,boosting agricultural production,developing a robust distribution network8230; We can live with 8-9 per cent inflation8230;with the crisis in Middle East easing out in the next 4-5 months,commodity prices especially oil are likely to come down. It is time we dont take decisions for the day but for the future.

What are your views on the governments proposal of asking corporates to commit 2 per cent of their profits for CSR?

Many years ago,the PV Narasimha Rao government had proposed that we spend 1 per cent on CSR. After taking an audit,we realised that the company I was employed in was spending 8-13 per cent of its profits towards CSR much more than that proposed by the government. Companies should take care of CSR on their own and should not be bound by any percentage. It should be a part of their costs it should be a part of the activity and not the result. The government,on its part,should make laws to make declaration and audit of CSR activities compulsory. If we fix a percentage,the company can straight away assign 2 per cent of its profits to a NGO or any such institution,which may defeat the purpose.

What are your views on 26 per cent profit sharing in the mining sector?

Each company should have a corporate social responsibility plan of action. But if we mandate 26 per cent,it will be misused. In fact,the amount spent on CSR should be made a part of cost,which is real and not profit. It should be made as a per cent of cost.

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What enhanced role do you see for the corporate sector on affirmative action?

For the past 3-4 years CII has done some good work. We have trained scheduled caste and scheduled tribe people and are now looking at ways for increasing the sourcing of material from SC/ST entrepreneurs. We are also looking at how we can improve their product quality. According to a CII study in the eastern part of the country,industry employs 24 per cent SC/ST,16 per cent in west,18 per cent in south and 20 per cent in the north. Against a 25 per cent SC/ST population in the country,these figures are not bad. The only thing is that majority of those employed may be unskilled,so the opportunity for them to go up the ladder may be very low. But we are working on this. We are also preparing a data base of 800 or so Dalit entrepreneurs so that firms can connect with them and source products.

Do you support a sovereign wealth fund for exploration of resources abroad?

Chinese companies today are present wherever there are natural resources in the world. They are present in Latin America,Africa and Australia. The Chinese government realises that it will run short of natural resources coal,iron ore etc to support its huge population. It is true that companies such as SAIL,Jindal and NMDC have gone abroad but with government support this will be much easier. I am going to ask the mineral committee at CII to push for this. There is huge opportunity in countries such as Australia where population is low.