Second generation reforms will spur growth, says CII president

NEW DELHI, APRIL 29. Even though the investment climate has been hit hard by the stock market scam, industry expects the economy to grow by about 6.5 per cent this year. According to the new president of the Confederation of Indian Industry, Mr. Sanjiv Goenka, the country cannot remain insulated from the rest of the world and the global slowdown is bound to have an impact. At the same time, if the Government goes ahead with second generation reforms, resulting investments will kickstart the economy.

In an interview to The Hindu, the 40-year old - youngest ever - CII president maintained that economic growth was likely to hover between 6 and 7 per cent. Conceding that industry was going through difficult times, he said global slowdown presented an opportunity for Indian companies to provide out-sourcing facilities at cheaper costs.

On incentives for higher industrial growth, he said the Indian industry was not asking for protection. ``We are only asking for a level-playing field on policy-induced costs,'' he said. Citing the example of power, he said high tariffs on domestic industry were cross-subsidising low agricultural tariffs. It was for the Government to provide for the subsidy in its budget rather than impose this burden on the industry. Similarly, delays at ports, where a minimum of 20 days was required for unloading cargo, added to inventory carrying costs of companies.

``As long as we were being protected, we were prepared to pay these costs. But now (that) we have been opened to the world, we are not prepared to do so,'' he said, adding that other countries were producing similar goods more cheaply due to the absence of additional costs. ``Improve the system, but do not levy these costs on us,'' he said. In this context, he emphasised that the CII was opposed to any reservation of products for small and medium enterprises.

On prospects for second generation reforms, he underlined the urgency to prioritise infrastructure development. This included ports, roads, Railways and power. ``If we can invite investment in these sectors, it can kickstart the economy.''

About the experience of his company - RPG Enterprises - which had taken over the Calcutta Electricity Supply Corporation, he denied any unhappiness over the acquisition. The only problem was lack of tariff increases but power distribution and transmission sector was a viable one for investors.

Foreign investments had slowed down due to various reasons. It was important for investors to be assured of returns on capital. As long as this was ensured, there would be no dearth of foreign investment in critical areas of the economy. ``Nobody invests for charity.''

On the stock market scam, he said industry was not satisfied with the role of the market regulator, the Securities and Exchange Board of India. The regulator must be more transparent, quicker and effective. The CII had set up a national task force on capital markets to review the problems and recommend measures to bring about greater transparency and effectiveness. As for whether SEBI should be given more powers, Mr. Goenka said it needed more trained and qualified people like the Securities and Exchange Commission of the U.S. It was important to train the persons concerned as there was not enough knowledge on regulations.

The scam had not affected the morale of industry but it did have an impact on the investment climate since it was not possible to raise funds from equity markets in this scenario. The impact of the budgetary provisions would still be felt in the medium-term though the feel-good effect had evaporated for the time being owing to problems in the equity markets.

Highlighting the new-look CII, Mr. Goenka disclosed that Ms. Ekta Kapoor of Balaji Films had been made the head of the new entertainment committee. A retailing committee had been set up for the first time under Mr. Nagesh Rao of the Shoppers' Stop. There would also be committees on healthcare, education and IT- related services and logistics.

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