The Hindu Business Line : `More corporate funding must to tackle issues in social sector'

THE economic divide today is far more dangerous than the communal divide, and there is need for greater corporate social responsibility for tackling social sector issues such as education, health and empowerment of women, especially in semi-urban areas. The widening urban-rural gap in terms of economic welfare, unless reduced soon, is bound to hit the country hard.

Participating in an interactive session organised by the Indian Chamber of Commerce (ICC) here on Thursday, Mr Narayanan Vaghul, Chairman of ICICI Bank, said the Indian industry was now on the threshold of a recovery, after a long period of recession (from 1996 to 2003). He said the key issue today was not so much the "Feel good or feel cheated" element, but whether the economic gains can be sustained over a period of time to take the country to a higher growth plane, from the 8 per cent slot.

Mr Vaghul cautioned that all these feel good factors such as booming stock exchanges, comfortable foreign exchange reserves, liquidity in the banking system etc., which have arisen from a global phenomenon, will disappear one day. He said the reversal of the "feel good" will happen once the global economy recovers substantially, and global liquidity gets squeezed out of the Asia-Pacific rim countries through the climbing interest rates. "Hence, we need to develop the skills to control the process of reversal of the feel good elements."

Pointing out that he has not witnessed such fall in interest rates in banking, Mr Vaghul said the current proxy economic indicators, riding on low inflation rates and increased consumer spending, clearly hint at the presence of a feel good factor.

Citing the recent The Economist article, which describes the 8 per cent economic growth achieved by India mainly on account of a successful monsoon as somewhat freakish, Mr Vaghul admitted that a single year healthy growth meant nothing, especially considering the long-term growth averaging at 5 per cent to 6 per cent.

Answering to the question whether the industry can make up for a shortfall in agricultural growth, he said on the plus side, it must be conceded that the long-term indebtedness of the Indian industry was now reduced, auguring well for the future.

Pointing out that costly middlemen and lack of post-harvest facilities such as cold chains were hampering agriculture, he urged the corporate sector to help in the post-harvest phase to bring the produce to the market.

Mr Vaghul said the three most important sectors with growth opportunities for Indian industry today were IT, bio-technology and the financial sector.

Lashing out at the China syndrome, he said the competitive advantages of China vis-à-vis India have been overplayed, as India was now in a strong position to take on China, at least on the manufacturing side.