The Confederation of Indian Industry (CII), on Monday, advocated a cut of 100 basis points in policy rates by the Reserve Bank of India in 2013-14 to attract investments.
Pegging economic growth at 6-6.4 per cent in the current financial year, the newly-elected CII President S. Gopalakrishnan asked the government to maintain the momentum of economic reforms to increase investor confidence.
“The RBI needs to work in tandem with the government in boosting growth by easing interest rates by at least 100 basis points in the current fiscal. Reform agenda must continue,” he said.
Mr. Gopalakrishnan, who is the co-founder and Executive co-Chairman of Infosys, suggested a growth target of 8-9 per cent in the next two years by kick-starting investments to accelerate economic growth.
Mr. Gopalakrishnan, who is the Executive co-chairman of Infosys, said challenges such as inflation were due to supply-side constraints and “we need to increase capacity and this requires investment. Investments will increase once the rates are reduced. It is all linked.”
As per the CSO estimates, Indian economy is expected to grow by 5 per cent, the lowest rate in a decade, due to poor performance of manufacturing, agriculture and the services sector.
As per CII forecast, industrial growth is likely to recover, given the lower base of the previous year, but will remain at 5-5.5 per cent.
Agriculture is forecast to grow at 2.5-3.5 per cent, while it expects growth in services sector to be about 7.2-7.5 per cent due to the “fragile global conditions”.
While there was not much that could be done about the external factors, there were things like implementation of Goods and Services Tax (GST), which could be done at the domestic level, he told reporters.
“Steps like early implementation of GST alone would help in adding 1-2 per cent to the GDP growth,” he said, adding reviving stalled projects was also a critical precursor for facilitating higher overall investments.
“The Cabinet Committee on Investment (CCI) should aim for making a repository of the top 50 stalled projects in terms of investment incurred and go in for their revival on a priority basis,” he said.
Streamlining procedural reforms was another major step for India to catapult itself to the high growth trajectory, he added.
Mr. Gopalakrishnan also asked the government to allow foreign direct investment (FDI) in critical sectors such as insurance, banking and pension funds.
The industry body said it would set up a task force to recommend strategies to improve business regulations in India.