India Inc hits out at policy paralysis

Call upon govt to put decision making on fast track and push infra investments.

Industry captains hit out at the policy impediments and lack of investments in India. They called upon the government to put decision making on a fast track and give a necessary push for infrastructure investment in particular to increase the growth rate.

At the manufacturing summit organised by CII, Ajay Piramal, chairman, Piramal Healthcare India, actually set the tone and asserted that in a capital-starved country, no substantial foreign direct investment was coming and Indian companies were investing outside. “Today, to start a manufacturing unit, you have so many impediments, from acquiring land to environmental approvals. This poses constraints in expanding capacity. It takes five years to start an industry in India, while it takes two in China. The drop in production we see can be attributed to these problems.”

He also indicated that there were opportunities galore for a bright future but we were not doing enough. We need to bridge the infrastructure deficit and create the right policy framework. He observed that banks don’t have adequate capital and, hence, FDI needed to be encouraged. On an optimistic note, he said, “Globally, growth is slowing. India is looked upon by people as a country with high quality manufacturing. We, thus, have several opportunities but we also have to address the problems.”

Piramal at the outset clarified that he was not an economist but insisted the high rate regime was not having the desired impact on inflation, while hurting growth. "Interest rates have gone up too high and the availability of capital and the adequacy of banks will be a great constraint. I do not know whether these 13 rate hikes have actually been able to contain inflation. Till now, every time we have heard inflation is coming down but it is not yet," he observed.

Jamshyd N Godrej, chairman, Godrej & Boyce, said, “The challenges are tremendous, like lowering of growth rate, delaying of important legislation, including the one on GST, infrastructure, skill development. Yet, this is also an inherent opportunity and we should internally see how we can raise our standards, become greener and improve quality to take advantage of the situation.” He added, “GST is an important legislation which we have all recognised as essential for improving the tax and cost structure in manufacturing. Yet, there is lack of information about GST and we need to move rapidly to spread awareness on its benefits.”

JJ Irani, former director, Tata Sons, said the economy needs support of the government and RBI. Otherwise, he feared the country may not even achieve 7 per cent growth rate in 2012-13. "In the second half of the current financial year, we will have lower than 7 per cent GDP growth rate. RBI should intervene to support rupee. There will be difficult time ahead for companies having foreign debt,” he said.

Further, Irani said India should be actually achieving 10 per cent growth with good government support and parliament working and passing bills. “So 10 per cent is in India’s grasp but with he current morass that we are in present even 7 per cent might be difficult.”

Zubin Irani, senior managing director, United technologies Corp India, said the global economic slowdown has impacted the pace of industrial growth in India. The situation has become more difficult for industry now. At present, it is tough to tell when the sentiment would turn in 2012 as may factors are at play.