 "Urjit Patel. Photo courtesy: Kamlesh Pednekar")
Top Indian CEOs want the new Reserve Bank of India governor Urjit Patel to take a dovish stance and cut interest rates by as early as October this year so that it could help revive the falling investments by the private sector.
Promoters of many large conglomerates said the falling capital expenditure by India Inc is a worrying sign and was triggered mainly due to high interest rate stance taken by the RBI under outgoing Governor Raghuram Rajan which almost brought private sector capex to a grinding halt. With a new captain at the helm in the RBI, CEOs hoped there will be change on the ground.
"Urjit Patel is a brilliant choice by the Modi government considering his experience in both private sector as well as in the government, consulting firm and the IMF," said Harsh Goenka, Chairman of RPG group. "He was also the architect of monetary policy committee so we look forward to his tenure," he said.
India Inc is clearly worried with falling investments as evident from data collated by the research firm, CMIE. A study of investments in the first two years of Modi government shows that private sector companies have taken a back seat in making new investments while its the public sector companies have taken the driver's seat. This has resulted in lower job creation - exactly opposite of a key election plank of Prime Minister Narendra Modi - and idle capacity across all sectors. CEOs also complained that banks have identified around 200 stressed companies under the asset quality review as per the RBI's orders but did not come up with any solutions on how to revive these companies. A scheme, called S4A, launched by the RBI in June this year found only one taker (HCC) till now even as other companies grapple the scheme's conditions. This "ivory tower" approach by the RBI was not liked by the corporates who complained about the shortcomings of the scheme.
Ajit Gulabchand, Chairman of HCC said the RBI governor has a big job to do and has to balance between high inflation and growth. "He knows India and its problems well so there are lots of expectations," he said.
Chairman of Videocon group, Venugopal Dhoot hoped Patel will reduce interest rate and also take measures in reducing inflation.
"I hope that Patel will ease finance to infrastructure sector that needs capital very badly. There are many stalled projects across India that needs last tranche of funds to complete projects," he said.
One of the biggest losers in the recent years were steel and power sector companies. These companies lost sales as cheap imports from China and ate into their market share. Many of steel and power sector plants are running at half of its capacity. "I hope Patel will lower the interest rates to stimulate the economy," said Jindal Steel and Power CEO, Ravi Uppal.
