Upbeat Industry Sees 8% Gdp Growth

CII survey projects 12% industrial growth on the back of a path-breaking budget

The upbeat mood of industry following the announcement of the budget and various recent policy changes is reflected in the 47th business outlook survey of the Confederation of Indian Industry (CII), which has projected buoyant economic growth in 1997-98.

About 74 per cent of the corporate houses which responded to the CII survey projected a growth rate of 8 per cent in 1997-98. About 59 per cent of the respondents said they expected industrial growth to cross 10 per cent, while all the respondents expected a sharp rise in capital investment.

 

This optimism is in sharp contrast to last years survey, in which 74 per cent of the respondents had predicted stagnation or a slowdown in economic growth. According to the CII, this years outlook has improved because of the dramatic policy changes in the last 10 months.

The depressed industrial output results and the low growth in the last fiscal year reflect the effect of the virtual standstill in our economic liberalisation in the last two years under the previous government, said CII secretary-general Tarun Das, while new CII president N Kumar pointed out that February 28 was a great divide, with industry mood and projections changing dramatically before and after the budget.

The confederation had undertaken the survey last month to get a feel of industrys perceptions about the domestic economy after the changes proposed in the budget, the new Export-Import (exim) policy, the takeover code, the slack season credit policy and the draft Companies Bill.

The chamber released some preliminary trends based on responses by about 250 respondents yesterday and said it expected its detailed report to be ready within a week.

The CII has projected a gross domestic product growth rate of 8 per cent in 1997-98, with industrial growth estimated at 12 per cent and agricultural growth at 4 per cent. The chamber has also projected a 20 per cent rise in exports, while imports are slated to increase by 25 per cent.

Reflecting the buoyant financial scenario, the CII has predicted an inflow of $3.5 billion of foreign direct investment and an inflow of $4.5 billion of foreign institutional investment in 1997-98. Its preliminary estimates put the countrys forex reserves at $25 billion by the year-end. N Kumar yesterday announced that the chamber will focus on 13 key issues as part of its national economic agenda for the year in order to speed up economic growth.

The CII has decided to focus specifically on the infrastructure sector. It has called for more transparent laws and amendments to existing laws to enable the sector to be restructured, corporatisation of various SEBs and major ports, and improved utilisation of existing assets.

The chamber plans to provide the government regular feedback on the functioning of the various regulatory authorities proposed for infrastructural sectors like telecom, power, ports and roads. Kumar also unveiled the CII road-map for capital account convertibility, which suggests that a beginning should be made with current account transactions, especially for travel, tourism, and imports. Thereafter, it has recommended speedy adoption of the proposed Foreign Exchange Management Act (Fema) to ease the stranglehold of the Foreign Exchange Regulation Act (Fera) on the corporate sector.

The CII suggested a further relaxation of external commercial borrowing limits. It also asked for increased freedom to exporters to utilise foreign exchange earnings, including permission to take up to Rs 1 lakh out of the country.

The chamber also suggested that Indians should be allowed to open foreign currency accounts in the country as part of the steps towards full convertibility.

It has also decided to conduct specific studies through special in-house committees on financial sector reforms as well as administrative restructuring.

The other items on the CII agenda include access to foreign private equity, export growth, small-scale sector reforms, upgradation of technology, agriculture reforms and the food processing sector, investment in technology, the construction boom, and public sector reforms.

74% of respondents expect over 8% GDP growth

59% expect industrial growth of over 10%

All expect sharp increase in capital investment

8% GDP growth

12% industrial growth rate

4% agricultural growth

20% export growth

25% import growth

$3.5 billion FDI inflow

$4.5 billion FII inflow

Bajaj bows to corporate ethics code

Our Corporate Bureau New Delhi

Rahul Bajaj, chairman and managing director of Bajaj Auto Ltd, has decided to step down from the boards of at least two non-group companies.

A CII task force on corporate governance, set up last year and headed by Bajaj, had recommended that company directors who had not attended at least half the board meetings held in the previous year should step down.

I have not been able to attend even half the board meetings of these two companies (the names of which Bajaj refused to disclose) last year and in all fairness, I should withdraw from these companies Bajaj told Business Standard.

The chairmen of the two unnamed companies have been informed, Bajaj said, but added that he had yet to decide on when to withdraw from the two boards. Either I resign, or start attending at least 50 per cent of the board meetings. Since the latter option seems difficult for me, I think I should resign in keeping with my own recommendations he said.

The other significant recommendation of the CII task force was that an individual should not be on the boards of more than 10 companies excluding associate companies and subsidiaries.

The CII task force submitted the draft corporate governance report for debate last month. The report is slated to be finalised by September this year. The recommendations are not legally enforceable but meant to be adopted voluntarily.