The Hindu : Business : CII advocates stress-relief role to government

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CII advocates stress-relief role to government

Special Correspondent

‘Market is still not liquid’, says CII
Remove roadblocks to infrastructure projects

CHENNAI: The Confederation of Indian Industry (CII) has cautioned the Government against lowering its guard as the problem caused by the global financial meltdown “is still unravelling”.

Addressing a press conference here on Thursday, R. Seshasayee, Chairman of the Economic Council of CII, said the country could be facing “some more waves of issues” that would impact the economy seriously. Asserting that the “situation needs constant monitoring,” he said, “We need to be concerned about the global crisis and take adequate steps to ensure that the growth momentum is not stopped.”

He said four issues — liquidity, capital, volatility of currency/commodity/asset markets and confidence level — needed to be addressed forthwith to ensure that the growth momentum was not stopped.

While lauding the proactive actions of the Reserve Bank of India and the Central Government to pump liquidity into the system, CII felt that the “market is still not liquid.” Many sectors, including the small and medium enterprises, did not have access to liquidity, he said. In this context, CII suggested the RBI to further cut the repo rate by 150 basis points. This need not be effected in one go but could be done in quick succession, he said. CII, he said, had estimated a liquidity shortage of the order of Rs. 100,000 crore. The situation could tighten further if trade liability in the form of forex loans that were falling due any time was not rolled over. CII, he said, also favoured relaxation in SLR (statutory liquidity ratio) by another 200 basis points to ease the liquidity situation. It also suggested that the oil and fertilizer bonds be made eligible for SLR compliance. Mr. Seshasayee said the situation as it was evolving should not be allowed to put a question mark over the survival of mutual funds and the non-banding finance companies (NBFCs). In this context, he called for a separate window in RBI to buy back certificate of deposits (CDs).

Stating that the market was “completely dry”, he said a combination of factors was making lenders and investors reluctant to participate in infrastructure projects. He reckoned that the current saving rate was not sufficient to sustain a five per cent plus growth rate. In this context, he said CII wanted the Government to target ‘large banner projects’ which were sound with sovereign guarantee. “This is one way of getting foreign investment,” he said. The capital goods sector, he said, had reported a slowdown in ‘pipeline projects’. The situation demanded a ‘pre-emptive action’ as “investment is critical for growth,” he pointed out. In this context, he said CII was keen that the Government removed roadblocks to infrastructure projects that were in the pipeline. CII, he said, felt that the Government should open up the debt market to foreign institutional investors by coming out with another effort (like the India millennium bonds) to garner $5-10 billion from non-resident Indians (NRIs) and others. There was deficit of confidence at the moment, he said.

“It is necessary not to lower the guard now,” he added.

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