Industry seeks lower rates, taxes

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New Delhi, Nov 16: Indian business leaders have sought lower interest rates and tax cuts to keep growth of the economy on track. They have also endorsed the G-20 position to make global trade negotiations more robust, reject protectionism and work towards the conclusion of the Doha Round of global trade negotiations under the World Trade Organisation.

Speaking at the India Economic Summit, organised by CII & WEF, ICICI Bank managing director & CEO KV Kamath said easier inflation should impact interest rates. “Interest rates are still high. Inflation has fallen to single digits. I think that would give confidence (to RBI) to roll back or signal drop in interest rate,” he said. Inflation came down to 8.98% during the week ended November 1 from 10.72% in the previous week.

Kamath said the biggest challenge before the country was to keep the confidence level high amid the global financial crisis, which has pushed the West into a recession. He said industry wants more funds for capacity building and ongoing projects, “but if the rates have to come down, further signaling (from RBI) is required”. The central bank has already cut its key short-term lending rate, repo rate, by 150 basis points to 7.5% and cash reserve ratio (CRR) by 250bps to 6.5%, as inflation eased and industrial growth slowed—in September factory output moderated to 4.8%.

Several public sector banks, including SBI and PNB, cut rates by up to 75 bps after their meeting with finance minister P Chidambaram earlier this month.

In the same vein B Ramalinga Raju, founder & chairman, Satyam Computer Services Ltd, said, competitiveness will be the key driver but protectionism will be dangerous for the industry. “The crisis has made us realise that the world is more interconnected than we thought.”

According to the Asian Development Bank, India should log 7.8% growth in this fiscal. But 2009-10 could be gloomier at sub-6.5%. “The numbers are very fragile, and they may be brought down further,” Rajat M Nag, managing director general of the bank told FE.

In April, ADB had projected the Indian economy to grow at 8% this fiscal. The revised lower growth estimate for 2009-10 is in line with projections of 6.3% GDP growth by the International Monetary Fund and 5.8% growth by Goldman Sachs. “India’s growth will not be anaemic, but will be lower and so definitely a cause for concern,” Nag stressed.