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Stress on good corporate governance practices

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NEW DELHI, Jan. 25

THE Indian corporate sector must demonstrate harder evidence of their adherence to good corporate governance practices if they are to retain the confidence reposed on them by the financial community, according to Mr R. Ravimohan, Managing Director, Crisil.

Addressing a meeting on "Future of manufacturing in India'', organised by Assocham here, Mr Ravimohan said that industry associations should muster courage and build consensus on weeding out members who are not part of the "good boys bandwagon''.

He also suggested CEOs with diversified businesses exit from all those areas that are not well suited for them.

"A quick decision in this regard will reduce tension and also frictions with the financial community. All companies in manufacturing will have to be adequately capitalised as price cycles of commodities are going to be more volatile in the coming months. Any enterprise having a debt-equity of more than 0.5:1 will end up becoming a sitting duck when prices come down," Mr Ravimohan said.

Stating that the postponement of VAT regime is "bad news" for industry, Mr Ravimohan pointed out that industry is unnecessarily being taxed for Government's complacency. "Industry associations should become activists and raise more noise against the power thefts as well as cross-subsidisation of power-tariffs to the agricultural sector,'' he said.

The Crisil chief also said that the rating agency expects a number of industry sectors to show far better performance on the capacity utilisation front in the coming years. He held that there would be favourable adjustment of demand-supply imbalances in a number of sectors.

"The message is that there is tremendous scope and competitive advantage for the manufacturing sector even though the rules of the game have changed,'' Mr Ravimohan said.

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