Will take up the issue of protectionism at G20 meet, PM tells industry.
Prime Minister Manmohan Singh today told leading businessmen in a meeting that the Reserve Bank of India (RBI) will take further steps to reduce key interest rates in order to boost economic demand, according to industry representatives present there. This was Singh’s second meeting with the captains of Indian industry in less than five months.
During the day, two state-owned banks, Central Bank of India and Andhra Bank, cut their prime lending rates by 50 basis points and 25 basis points, respectively.
Today’s meeting took place in the backdrop of near-zero inflation, though borrowing cost for companies still remains in double digits. “With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates. Domestic credit flow for productive needs has to be definitely maintained at reasonable cost,” Singh said. RBI Governor D Subbarao was present at the meeting.
RBI has reduced the repo rate (at which it lends to banks) by 4 percentage points to 5 per cent in less than six months. However, the reduction has not translated into low borrowing cost for companies. State-owned banks have reduced prime lending rates by up to 2 percentage points in the last few months, but private and foreign banks have not done so.
Tata Sons Chairman Ratan Tata, Aditya Birla Group Chairman Kumar Mangalam Birla, ICICI Managing Director and CEO K V Kamath, Essar’s Shashi Ruia, RPG Group Chairman Ram Prasad Goenka, Adi Godrej, Sunil Mittal and Sunil Kant Munjal attended the meeting. Industry associations Federation of Indian Chambers of Commerce & Industry, Confederation of Indian Industry and Assocham were represented at the meeting. The two Ambani brothers, Mukesh and Anil, were not there. Planning Commission Deputy Chairman Montek Singh Ahluwalia and Cabinet Secretary K M Chandrasekhar were also present.
Singh’s statement assumes significance since the country’s industrial production has seen a decline for two consecutive months. In December 2008, production declined 0.63 per cent, while in January 2009 the output dipped 0.5 per cent. This has happened for the first time in 16 years.
Agenda for G20 meet in London
Singh also sought industry’s views on the forthcoming meeting of G20 nations in London starting from April 2 to address the global economic crisis in a collective effort. Singh, said industry representatives who attending the meeting, promised to raise the issues of global protectionism and restriction on visa issuance at the summit.
“We are concerned about global protectionism and dumping from China. We brought up the issue of how the western governments are becoming protectionist even in terms of capital inflows,” CII President Venu Srinivasan said. “Anti-dumping and safeguard duties must be brought in. The commerce secretary said steps are being taken,” added Assocham President Sajjan Jindal.
Singh expressed satisfaction that sectors like steel, cement and automobile are showing signs of a revival as a result of the various measures taken by the government. Rural demand for goods and services appears quite robust and the outlook in the agricultural sector gives room for optimism, he said.
After posting growth of over 9 per cent in the preceding three years, the Indian economy is projected to grow 7.1 per cent during the current financial year, 2008-09, according to the Central Statistical Organisation. “We are aware that a big push to infrastructure would have a counter-cyclical influence and have taken steps to ensure that this happens in 2009-10 and beyond”, Singh said.