Industry-PM meet today to discuss trade barriers

3rd meet since 2010 to raise issues on investment, trade and the rupee

Captains of Indian industry are to discuss some major issues  hampering business growth and of the economy at large with Prime Minister Manmohan Singh today.

Those scheduled to be present are N R Narayana Murthy, Adi Godrej, Chanda Kochhar, Sunil Bharti Mittal, Deepak Parekh, Rahul Bajaj, S Gopalakrishnan and Naina Lal Kidwai, among others.  

This is the third such meeting between the Prime Minister and industry captains. The first such meeting was held in 2010 and was attended by almost all the captains of the Indian including Ratan Tata, Rahul Bajaj, Mukesh Ambani. The agenda of the council included skill development, financial inclusion etc.

The second meeting was held thereafter, where too the overall agenda was economic development.

The tempestuous meeting today is expected to also take up the recent efforts made by the Reserve Bank of India (RBI) to halt the fall in rupee, which depreciated by almost 10% between May to July.

“Depreciation of the rupee  has affected all sectors across the board. This will be one of the main issues. Besides, industry will also take up other major concern areas such as a complete collapse of investment and a failed manufacturing policy,” an industry representative told Business Standard.

There is also a widening current account deficit (CAD). It was $87.8 billion or 4.8 per cent of gross domestic product (GDP) in 2012-13, against $78.2 bn or 4.2 per cent of GDP in the previous year.

Last week, while delivering a speech at the company’s annual general meeting, ITC’s Y C Deveshwar highlighted some of the major challenges facing the industry and economy. He underscored the need to “contain and find a longer-term solution” on inflation, the fiscal deficit and the CAD. “To my mind,” he said, for instance, “one of the most critical problems hindering India's growth prospects is the unsustainable current account deficit...it is very  clear that the only sustainable solution is to create extreme competitiveness in higher value-added goods and  services.”

According to CRISIL, the rupee’s depreciation has particularly affected sectors such as automobiles, auto components, airlines, consumer durables, oil marketing companies and fertiliser. During January-April, inflows of foreign direct investment touched $7.8 bn, up just one per cent from a year before, said the Ministry of Commerce and Industry.  Business does not seem as enthused now with the recent FDI relaxations, such as in telecom and single-brand retail. They feel the government is “rushing through” the process and this might hamper Indian industry in the long run. Apparently, Monday’s discussion was an outcome of a meeting India Inc had with Commerce and Industry Minister Anand Sharma in late June. He had to face some challenging questions.

The story on exports also looks grim. During April-June, these were $72.5 bn, down 1.4 per cent compared to the $73.5 bn in the first quarter of 2012-13. The trade deficit during April-June was $50.2 bn, higher than the $42.2 bn in the corresponding period of FY13.  

Some other issues likely to come up at the PM’s meet are skill development and the proposed Delhi-Mumbai and Chennai-Bangalore industrial corridors.