Interest rates need to come down: Kamath

The annual India Economic Summit, hosted by the Confederation of Indian Industry and the World Economic Forum, which began on Sunday amidst one the worst global financial crisis in recent times, while acknowledging the gravity of the situation had an underlying message?We Shall Overcome.

The who?s who of India Inc harped on the strong fundamentals of the Indian economy and the resilience of their respective sectors to drive home the point that things would improve in the medium to long-term.

Making a case for further cut in interest rates, ICICI Bank, CEO and CII president, KV Kamath said the government had taken prompt and appropriate measures to avert major disasters.

?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. The biggest challenge before the country is to keep the confidence level high amid global financial crisis, which has pushed the West into recession, he said. ?I think India is in a distinctly different position. The challenge before us is to be confident in this global situation,? Kamath said. India, he said, is different because despite global recession it would continue to grow by around 7% in the current fiscal and the growth will not be less than 6% during 2009-10.

Kamath said that in the next few weeks Indian industry will have to work out strategies to meet the global challenges. ?What will drive the Indian economy will be the domestic market?, he said.

Rajat M Nag, managing director-general, Asian Development Bank harped on the resilience of the Asian financial sector. ?NPA and short term external debt is low while capital adequacy ratio is good across Asia.

Since fundamentals are strong no full blown crisis will be felt here. It is important that we look at medium to long term development?, Nag said.

Nandan M Nilekani, Infosys Technologies Ltd co-founder and co-chairman, said, that there is an overall slowdown in the IT sector, but it is resilient enough to sail through the crisis. ?Our company will go ahead with its plan of hiring people. The growth in the IT sector during the current fiscal will not be as good as witnessed for the last four years?, Nilekani said.

The sentiment was echoed by the Inforsys CEO, S Gopalakrishnan when he said, ?We see an opportunity for recruiting the right people. We will also be focusing on education and training to keep our employees engaged. Indian companies do not usually engage in large lay-offs. So, we have to prepare them for the upturn that will happen. I expect the Indian IT industry to emerge stronger after the crisis due to the global delivery model and the scale, strength and maturity that it has reached?.

Ramalinga Raju, founder and chairman, Satyam Computer Services Ltd, said the crisis has made us realise that the world is more interconnected than we thought. In 2000, when the technology bubble burst, hell did not break loose as the impact was confined to the technology sector and did not spread to other sectors. However, the technology sector has evolved over the last few years and we hope to deal with this crisis in an effective fashion. Competitiveness will be the key driver but protectionism will be dangerous for the industry.

India has to take advantage of the current knowledge base and the new talent that can be developed.

The doyen of Indian industry, Bajaj Auto chairman, Rahul Bajaj, while acknowledging that demand has slowed down, which has resulted in production cut, ruled out any lay-offs in his company. ?Unlike the IT or services industries, where the total cost of employee is 16-18%, in our case it is 3.5%…so if I sack or reduce employee numbers it will not help me much. So why should I get bad reputation,? Bajaj said.

He said that the government should follow a pro-growth policy. Fiscal stimulus is a must in times like these.

PepsiCo India Holdings, CEO, Sanjeev Chaddha, said that as far his company?s plans are concerned it would be business as usual. Pepsi has recently announced a $500 million investment in the country in the next three years to scale up business.