New Delhi: Finance minister Pranab Mukherjee will meet leaders of Indian industry, including Ratan Tata, Mukesh Ambani, Anil Ambani and Sunil Bharti Mittal, on Monday as the government tries to tackle a sluggish economy amid spiralling inflation and high interest rates.
Other top industry leaders, Kumar Mangalam Birla, Y. C. Deveshwar and Narayana Murthy and Anand Mahindra have also been invited to the meeting to discuss ways to rejuvenate the economy, finance ministry sources said.
“The finance minister will discuss steps to boost industrial output and promote economic growth and has invited chiefs of country’s 17 top corporates,” they said.
The industry, which is reeling under a high interest regime for quite sometime now, is likely to point out their trouble areas as rising inflation is making credit costly.
To tame inflation, which has remained close to double digit mark through April-June quarter, the Reserve Bank of India has hiked interest rates three times so far this fiscal.
Industry is of the view that rising interest rates is increasing the input cost as loans are getting costlier.
In an interview to PTI, Mukherjee admitted that high interest regime being followed by the Reserve Bank “to some extent may effect (the GDP growth)...”
The impact of slowing credit is also visible in industrial output growth rate, which dipped to a nine-month low of 5.6% in May due to poor show of manufacturing and mining sectors and lower off take of capital goods.
The central bank has raised its key policy rates 11 times since March 2010 to check inflation which is above 9%.
The government, sources said, is also concerned about slowdown in investments, particularly the inflow of FDI.
Measures to attract more foreign and domestic investment are likely to figure prominently during the meeting.
FDI has slumped by about 9% to $6.5 billion in the first four months of the calendar from $7.14 billion in the same period last year.
Several economic reforms initiatives which include raising of the FDI limit in insurance sector, allowing FDI in retail and revamp of the direct and indirect tax system are pending.
The government had projected that India’s GDP growth would be between 8.75% and 9.25% this fiscal. However, the Reserve Bank of India lowered the growth projection for the current fiscal to 8%, lower than the 8.5% recorded in the previous fiscal.
Global ratings agency Fitch has also lowered its growth forecast for India in 2011 to 7.7% from 8.3% previously.