Blaming rising interest rates for the investment slowdown in the economy, industry chamber CII's new president and vice-chairman of Tata Steel, B Muthuraman, asked Reserve Bank of India to moderate its tight monetary stance.The central bank is slated to announce its annual policy for 2011-12 just about a week later.
At his first press conference as CII president, Muthuraman said while the Indian industry must seek to make growth inclusive and sustainable and must work towards addressing various inequalities in society, affirmative actions cannot be made mandatory.
He also favoured an amnesty scheme by the government to bring black money into mainstream of the economy, even as the government itself has dropped the idea.
Referring to the state of economy, Muthuraman said RBI should moderate monetary tightening policy in its efforts to rein in spiralling inflationary pressure as it had resulted in slowing down of investments.
The gross fixed capital formation as a percentage of GDP is estimated to have declined to 29.3 per cent last financial year from 30.8 per cent a year ago.
It stood at over 30 per cent in the previous three years.
"Inflation remains a cause of concern. The rise in global commodity and oil prices has fed into higher inflation in manufactured products. This can prompt a more aggressive stance from the RBI," he said, while cautioning RBI not to go for hawkish policy.
RBI has already raised policy rates eight times since it started tightening policy in early 2010. The CII president said India had the potential to register a growth rate of 10 per cent in the medium term consistently with capacity additions in industry and services, movement in reforms, moderation in raw material cost and strong global demand.
He charted out a five-pronged strategy for achieving 10 per cent growth. He said creating a common market, fast-track implementation of 100 mega projects, allocation of natural resources and improving investment scenario were keys to achieving higher growth.
Muthuraman also underscored the need to adopt measures to attract
more foreign investments, need to correct trade balances, enhancing labour productivity and creation of clusters.
Demanding that affirmative actions be left to the industry, he said: "We will ask companies to explain their step towards affirmative action. At CII, we will ask companies to submit quarterly reports on performance of companies on affirmative action to the government."
He said CII would also ask its member companies to provide equal employment opportunity, not practice discrimination of any kind and would have a written policy statement on affirmative action in the workplace among others.
He also said CII would seek to remove discretionary powers of the government, which are blatantly misused.
Supporting an amnesty scheme by the government, he said it should adopt a "carrot and stick approach".
"We are dead against black money and corruption and this is one problem in the country which has to be solved. Misuse of discretion and standards, lack of transparent rules and procedures and lack of transparency in public procurement are the key challenges for governance CII is of the view that there is a need for an amnesty scheme.
"If somebody does not declare (black money) you must punish. However, the amnesty scheme can only be announced once. You cannot have two," he said.
Revenue Secretary Sunil Mitra had earlier said the government had shelved the idea of amnesty scheme since part of black money is also generated through criminal activities.
Muthuraman also added if the country had to emerge as one of the preferred destinations for global investors, the issue of lack of effective and quality governance had to be addressed.
"Some key challenges in front of the government today are misuse of discretion and standards, lack of transparent rules and procedures and lack of transparency in public procurement," he said.
The issue also cropped up at the full Planning Commission meeting last week, where Prime Minister Manmohan Singh had asked the Commission to focus on policy reforms while aiming at 9-9.5 per cent growth a year on an average in the 12th Five Year Plan, which would start from next financial year.
