Cut in interest rates must to boost investment: Industry

Industry leaders, including Tata Group chief Ratan Tata and TVS Motor Company CMD Venu Srinivasan, today said it is essential to significantly reduce interest rates to boost investments in the country.

The Reserve Bank hiked lending rates 13 times between March 2010 and October 2011 to tame inflation. It led to high interest rate regime making borrowings costly for industry as well as consumers, hitting economic growth.

"Representatives of industry were of the view that a significant lowering of interest rates by the RBI was essential for the revival of investment at the present juncture," an official statement said after the first meeting of National Manufacturing Competitiveness Council (NMCC).

The meeting, chaired by Commerce, Industry and Textiles Minister Anand Sharma here, was attended by industry captains.

Amid high interest rates, growth in non-food credit offtake slipped to 15.8% at Rs 45.20 lakh crore during 12 months ending February 10, 2012, according to RBI.

Economic growth slowed to a nine-quarter low of 6.9% in the July-September period.

Earlier this week, Finance Minister Pranab Mukherjee had admitted that high interest rates, coupled with adverse global situation, were impacting investment and economic growth.

The rate of industrial production measured on Index of Industrial Production has moderated and even entered into negative territory in October.

With economic activities slowing down, the Reserve Bank refrained from hiking interest rate in its last two credit policy reviews, and also indicated that its tight monetary policy stance may be reversed if inflation situation improves.

Industry leaders and Sharma also discussed ways to achieve the objective of 12-14% manufacturing growth rate as envisaged in the National Manufacturing Policy (NMP).

"The easing of regulatory burden on manufacturing specially for the small and medium enterprises was also essential for competitiveness. It was agreed that this should be given utmost priority," the statement added.

Participants pointed to the risk to manufacturing sector from difficulties relating to getting land and its high costs.

Sharma told them that the National Industrial Manufacturing Zones (NIMZs), the first of few of which have been identified, were the key to providing affordable land with infrastructure for globally competitive manufacturing.

The NMP aims at creation of 100 million jobs over the next ten years and raise the share of manufacturing in the GDP to 22-25% from the current 14-16%.

Among other industrialists who attended the meeting included S Kumar group's Mukul Kasliwal, Sona Steering's Surinder Kapur and ITC Chairman YC Deveshwar.