The Hindu Business Line : Chidambaram to meet ‘select group’ of CEOs

New Delhi, Aug 25 Amid concerns of slowdown in industrial growth in an environment of hardening interest rates and high inflation, the Finance Minister, Mr P. Chidambaram, will meet a ‘select group’ of chief executives of Confederation of Indian Industry member companies here on Tuesday to assess the industrial performance and mull steps to boost growth.

“The meeting will discuss the state of Indian industry and its performance in recent times. It could throw up new ideas on what needs to be done to improve output”, industry sources said.

The meeting assumes significance as it comes close on the heels of the release of the first quarter (April-June 2008) data on industrial growth at 5.2 per cent, which is almost half the growth rate of 10.3 per cent achieved in the same period last year. Industrial growth in June also witnessed a slump to 5.4 per cent (8.9 per cent).

Outlook report

The Prime Minister’s Economic Advisory Council, headed by Dr C Rangarajan, had in its recently released economic outlook report for 2008-09, pegged the industrial growth at 7.5 per cent (8.5 per cent). The council has projected manufacturing growth at 7.2 per cent (8.8 per cent).

Indications are that the industrialists may complain about hardening interest rates and its adverse impact on manufacturing. They are likely to highlight that the RBI’s monetary tightening to rein in inflation was leading to rise in interest rates and resulting in costlier credit, especially for Small and Medium Enterprises (SMEs).

Singur protests

The hurdles faced by Tata’s Nano car project at Singur on account of protests by certain political parties are also expected to be discussed at the meeting.

“Industrial slowdown is linked to RBI’s monetary policy. It is RBI’s design. The only redemption for reversing industrial slowdown is to reduce interest rates, which is difficult in a situation of high inflation. Industry will revive if monetary tightening is reduced, but RBI is keen on taming inflation”, Mr D.K. Joshi, Crisil’s Principal Economist, told Business Line.

He said that the Government should immediately look at supporting SMEs and in the long run, take steps for providing a better infrastructure to industry. Mr Joshi pointed out that the impact of interest rate tightening would be felt more in the next year.