The Confederation of Indian Industry (CII) has pressed for one per cent cut in interest rates by the Reserve Bank of India (RBI) to attract investment and demanded more reform measures to
accelerate economic growth.
The industry body's newly elected President Kris Gopalakrishnan on Monday said to revive economic growth and to take the expansion rate to 8-9 per cent in the next two years, it is essential to kick start investment.
"The RBI needs to work in tandem with the government in boosting growth by easing interest rates by at least 100 bps in the current fiscal. Steps like early implementation of GST (Goods and Services Tax) would help in adding 1-1.5 per cent in the GDP," he said.
Concerned over stubborn inflation,
RBI had been keeping a tight leash on its monetary policy. It cut its key rates after a gap of nine months in January this year.
According to government data released on Monday, WPI Inflation fell to over
three-year low of 5.96 per cent in March, boosting hopes of a rate cut.
Gopalakrishnan said supply side constraints is the main reason for inflation and reduction in interest rates would help in enhancing investments and increase in boosting capacity.
"There are certain things which we can do at the domestic level to boost economic growth. We can not do much (to improve) the external factors," he said.
On GST, he hoped that the amended constitutional amendment bill will be placed in Parliament in the monsoon session.
Gopalakrishnan, who is also Infosys Executive co-chairman, stressed the need for the Cabinet Committee on Investment (CCI) to aim for making a repository of the top 50 stalled projects in terms of the investment incurred and go for their revival on a priority basis.
"Streamlining procedural reforms is another major step for India to catapult itself to the high growth trajectory," he added.
According to CSO estimates, the 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. In the third quarter ended December 2012, the GDP grew by just 4.5 per cent.
For the current financial year, CII has projected a growth rate of 6-6.4 per cent.
Gopalakrishnan asked the government to allow foreign direct investment (FDI) in critical sectors such as insurance, banking and pension funds.
He also called for review mechanism for existing free trade agreements. "The mechanism would assess the impact of these FTAs on the domestic industry," he said adding on the India-Eu pact, "some concerns have been raised and we will work with the government (on those things)".
India is negotiating a comprehensive free trade pact with EU since June 2007. The country has implemented such pacts with Asean, Korea, Malaysia, Thailand, Singapore and Japan.
On governance, Gopalakrishnan said that there is need for independent regulatory authorities in sectors of scarce resources like coal, real estate and health.
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