CII Communique November 2012

commenteconomyIs 6% Growth Achievable?There are indications for positive outcomesin the remaining months of this fiscal year,which should lead to restoration of growth atabove 6% says Chandrajit Banerjee,Director General, CIIAfter the decisive reform policies announcedrecently, industry is hopeful that 2012-13 willend with GDP growth rate of over 6%. Themain reason for this belief is that we see a distinctuptick in investor sentiments, which we think isbound to be followed up by new projects comingback on track.The first quarter growth itself at 5.5% showed thegrowth graph turning up, implying that at 5.3% in theprevious quarter, GDP slowdown may have bottomedout. Q1 industrial growth rate at 3.6% too displayedsignificant gains over the previous quarter at 1.9%.In the two months of Q2, the index of industrialproduction displayed strong revival in August after aslight contraction in July.As per the RBI’s survey, industrial outlook is improvingfor the current quarter. Forecasts by a number of analystshave been brought down, but most are still above the6% level. Signs of revival are also evident in largerorder books and planned capex. All these indicatorspredict a somewhat higher pace of growth for the nextthree quarters.The Government has taken large strides for restoringinvestment confidence. The decision on FDI in multibrandretail was a long awaited step, and had animmediate impact on the mood of investors. Othermeasures to encourage inflow of foreign capital insectors such as broadcasting and aviation, as well asthe intention to lift FDI limits in the insurance sector, too,will help put India back on the investors’ map.The Finance Minister has announced a road-mapfor fiscal consolidation which will go a long way toreassure economic ratings analysts about the healthof the economy. Following up on the initiative toreduce subsidies in gas and diesel, as well as toleverage Aadhar for targeted distribution of subsidies,it reinforces the commitment to keep fiscal deficitunder control, which should ease fund availability forcorporate India. Additionally, proactive steps to garnerresources through disinvestment and other sourcesas announced could keep fiscal deficit for this yearat the targeted 5.3%.There are several other steps that could drive growth forthis fiscal year. CII had urged for a cut in interest ratesfrom the RBI. A rate reduction would immediately sparka new cycle of investment across all sectors, puttingshelved projects back on the table.A determined effort to fast-track large infrastructureprojects would also boost demand for industrialgoods. A National Investment Board could identifyroadblocks and clear hurdles through coordinationwith different ministries and departments, which atpresent is the job of the project managers. In thelonger run, these projects would add greatly tocapacities and unlock fresh investments down theline.Several other reform measures are in the legislativeprocess, including the crucial Goods and Services Taxand the Direct Taxes Code. If these see progress inthe coming Parliament session, it is likely to furtherinvigorate growth. Overall, all indications are for positiveoutcomes in the remaining months of the year, whichshould lead to restoration of growth at above 6% andhigher in the following years.This article by Chandrajit Banerjee, Director General, CII, first appearedin the Asian Age on 1 November 2012.Communiqué November 2012 | 11