High interest rates are a barrier to investments and there is a need for at least 100 basis points cut in such rates, the new FICCI President Sandip Somany said.

A significant cut in interest rates, especially in the current times of low inflation, will be the single most important point to trigger growth in the economy, Somany told BusinessLine in an interview.

Somany, who assumed charge of the apex industry chamber recently, said real interest rates in the country are at historic highs and the low inflation (CPI at 2.3 per cent in November) that is now there does not justify such high interest rates.

“We need at least 100 basis points cut in interest rates. Doing it piecemeal at 0.25 percent is not enough as most of the times the banks absorb it and benefits will not percolate down to trade and industry,” Somany said.

Reducing interest rates will not only be an industry-friendly move, but also an economy-friendly move as they will reduce EMIs and help improve consumption, he added. “When cost of money comes down, even a rural consumer will benefit,” he said.

India, Bharat must co-exist

Somany, who is currently Executive Vice-Chairman and Joint Managing Director of HSIL Ltd, a manufacturer of sanitaryware and glassware products, felt that India is on a cusp of higher growth trajectory and, barring any unforeseen global event, should comfortably achieve 7.5-8 per cent GDP growth in the coming year.

But what is important is that India and Bharat must co-exist, he said. “India cannot and should not progress at the cost of Bharat. We have to frame policies in such a way that fruits of liberalisation are enjoyed by our brothers and sisters in the rural areas also. You have to ensure percolation of wealth across the country. Focused development in some regions is certainly necessary. Hope some of FICCI’s inputs will get reflected into the proposed new industrial policy,” he said.

Manufacturing push

The FICCI President suggested that the Government must have phased manufacturing programmes for all import-intensive items like the one introduced for electronics. By 2022, India’s electronics imports are expected to surpass oil imports. So it made sense for the Government to introduce phased manufacturing programme in electronics and start with mobile phones. Similarly, the Government must provide greater focus on textiles and apparel, leather and handicrafts, he said. “Focus on these sectors as they are going to give maximum bang for the buck,” he said.

He felt there was no case for the Government to keep the GST on cement at 28 per cent and should look to bring it down to 18 per cent.

Somany also felt that entrepreneurs should get their land requirements addressed speedily. “Land is not a burning issue, but is certainly an issue. It does not affect small and medium enterprises,” he said.

He also felt that there should be no cross subsidisation between industrial power, farm power and consumer power.

Govt’s performance

Somany said the story so far, in the last four years of the current government, has been “very good”, given the focused implementation of Goods and Services Tax (GST) and the landmark legislation of Insolvency and Bankruptcy Code. “In no other period have we seen as much as ₹3 lakh crore getting recovered by the banking system in such a short span of four years and IBC is the main reason for this. IBC has been a game changer and unscrupulous promoters of poorly managed companies are now under stress that they may lose control of their companies,” he said.

Asked about allegations of “crony capitalism”, Somany declined to be drawn into specific instances, but felt that there was no crony capitalism at all in the current regime. “They don’t do anything for you..any specific thing for you. In a country of our size, some deals are crooked. But lot of good has been done by the Government. The most critical aspect is that the Government must be transparent, clean and provide level-playing field so that entrepreneurs can compete on merits,” he said.

“Everybody has to align with growth. Unfortunately, the private industry is looked down upon these days. But the fact is that Government alone cannot create all the jobs that are needed. We need atleast 5-8 million new jobs for those entering the job market every year. Another 5 million is also needed for those shifting from agriculture to industry. So where are these jobs going to come from unless the private industry is encouraged. If there is stigma around private capital, how can you create jobs?,” he said.

The FICCI chief also felt that judicial reforms should be one of the main agendas of the incoming government.

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