India risks its economic growth rate slipping below 7% and its companies preferring overseas markets for business unless concerns about a policy paralysis are addressed and reforms are fast-tracked, industry leader Deepak Parekh has said.
Hoping that the economic scenario would improve in the new year, the eminent banker said he was hopeful that 2011 would be forgotten as a bad year and the government would press ahead with its reforms agenda.
"If policy paralysis continues and agriculture growth does not happen, we could slip below 7%," Parekh said in an interview with Karan Thapar on the 'Devil's Advocate' programme of CNN-IBN news channel.
When asked whether Indian industrialists would stay away from investing in India and would look at overseas opportunities if the policy paralysis continues, Parekh said: "Well, that trend can accelerate."
"More and more Indians are investing abroad but the market is in India. Everyone knows that the desire for Indian businessmen is to first to invest in India. It is a huge market, large population, large middle class, urbanisation happening. All factors are positive. Only if we can get our act together," he noted.
Parekh is a member of the Prime Minister's Council on Trade and Industry and was also part of a group of industry leaders and other eminent citizens that had written two open letters about the current state of affairs of the Indian Economy and the need to address the concerns of a policy paralysis.
These issues, along with the various efforts required to be made to spur investments, were also discussed at a meeting this Council had with the Prime Minister last month.
Asked whether India can achieve 8% growth without addressing the issue of policy paralysis and areas of concern with regard to the reform process, Parekh said: "I do not think we will get 8%. We will have to be satisfied with 7%."
"The monsoon has been good for the last two years. We have agricultural growth of 3-4.5%, which ensures we will get to at least 7%. If policy paralysis continues and agriculture growth does not happen, we could slip below 7%."
He, however, said there is a need to hope for the best.
"We have to look at it differently today. We have to be positive. It is a new year. Let us put the past behind us, let us look what we can do and how we can get back to 8% GDP growth," he said.
"The more you criticise the government and the more negative you are about the government, the confidence around you, the confidence of the people of the country, also takes a dip," Parekh noted.
Parekh expressed confidence the Prime Minister would live up to expectations.
"I am confident he will. You will see a different set of guidelines and difference in speed at which decisions are taken after February... I am very optimistic that the PM and his team have taken a view, have taken a decision, to not let 2011 continue," Parekh added.
When asked whether a loss of confidence was the reason for corporates not investing in India, Parekh said: "I do not know if they have lost confidence, but the risk of investments, the approvals, takes a lot of time, it is always risky."
"They may put large amount of money in a project if it does not take off, then they will be blamed why did you spend so much of money? The risk and the negative accusations...," he said.
Asked about his wishlist from the government to change the mood, Parekh said steps are required to spur investment.
"Secondly, interest rates have to come down gradually. Food inflation has come down extremely low, Interest rates have to come down to spur growth... Thirdly, the approval process has to be streamlined.
"Fourth, there are dozens of projects (that) are struck half-way, particularly in the power sector. These power projects have to be kick-started again," he said.
Parekh said that pending reforms in areas like taxes, pension, banking and insurance were very critical, especially for the next generation.
"The other thing is, the government must reduce its expenditure. (Then), we must push social projects as 60% of our population, 6,000 million or so live in rural India. How do we make them put more money in their pockets, so that they do more consumption," he noted.
Asked whether there was a problem of a conflict of interest between the government and the corporate sector, Parekh said: "If you ask me, in the year 2011, the government and the industrialists, instead of coming closer, have become furthered. That trust, that closeness, that association, that one must have to succeed in a country is diminished."
He said it is the responsibility of both parties to reach out to each other, but also criticised the trend of industrialists approaching the government for help when a particular industry is not working well.
Asked whether the business confidence was lower than even 2008 levels, he replied in the affirmative.
"... Fresh investments are not happening. We need massive investments in India, both from the public sector as well as the private sector, and neither are investing," he said.
Talking about the widespread concerns of a governance deficit, Parekh said: "When we talk of governance deficit. We are talking at two levels. One is petty corruption, which you and I and everyone in India faces, and one is the corruption at the senior level, like the Commonwealth Games, telecom scam..."
"The common man in India is corrupt because he cannot get anything done without paying a bribe... I myself had to pay for a death certificate. We need some redressal mechanism for this problem. We need police reform, judicial reform," he said.