Economic crisis: PM to meet top Industrial heads

New Delhi, Nov 2: Prime Minister Manmohan Singh has convened a meeting of top industry leaders on Monday, Nov 3 with an 'open agenda', but it is obvious that the impact on the Indian economy, some months down the line of the impending global recession, will be the fulcrum of the discussions.

There is a strong sense of fear that the global slowdown and the worldwide liquidity crunch will have their bearing on the Indian economy much more seven to eight months from now, rather than immediately. Apart from three heads of the apex chambers, nearly 10 captains of industry will be attending the meeting.

They include DLF Chairman K P Singh, Tata Group Chairman Ratan Tata, Anil Dhirubhai Ambani Group (ADAG) Chairman Anil Ambani, Reliance Industries Ltd Chairman Mukesh Ambani, Bharti Enterprises Ltd Chairman Sunil Bharti Mittal, Mahindra &Mahindra Ltd Vice- Chairman Anand G Mahindra, HDFC Chairman Deepak Parekh and ITC Chairman Y C Deveshwar.

No officials from the apex chambers will be part of the delegation.

Finance Minister P Chidambaram, RBI Governor D Subbarao and Planning Commission Deputy Chairman Montek Singh Ahluwalia will also be present at the meeting.

While FICCI will be represented by Rajeev Chandrasekhar and CII by K V Kamath, Mr Sajjan Jindal will represent ASSOCHAM.

The flight of capital from India to the West, mostly through the FII route, will also be part of the discussions.

The high volatility of the bourses will thus obviously figure in the discussions.

ASSOCHAM Secretary General D S Rawat told UNI that there is no fixed agenda that has been circulated for the meeting and it is thus ''oped ended''.

Mr Rawat, however, said ASSOCHAM will bring up the issue of the need to spend more on infrastructure projects to propel growth.

Besides, the urgency of various ministries to undertake expenditure allocated under the budget will also be brought up.

He said his chamber will stress the need for an improved mechanism relating to monitoring of expenditure by various ministries.

Mr Rawat said the efficacy of the Public-Private Partnership was important relating to infrastructure projects.

Official sources said the problem of demand compression, resulting from the higher interest rate regime earlier and inflationary pressures were the key concerns of both the monetary authorities and the corporate sector.

Highly placed sources in the government said the industry had been pressing the Prime Minister for a meeting to explain its view point.

Many industrialists had individually written to the Prime Minister for a meeting pertaining to the global liquidity crunch and its bearing on India.

It is only after a careful thought that Dr Singh agreed to convene a meeting with the captains of industry.

However, the Prime Minister was regularly being briefed by Mr Chidambaram and Dr Ahluwalia on the problems confronting the economy and the industry.

The Indian economy and Indian businesses are at the critical cross roads. ''Firm and decisive policy actions are required at this stage to address the growing crisis of confidence and put the economy back on the steady growth path for the next coming year,'' Mr Chandrasekhar said.

''Focus must come back fully on growth and not a half-hearted shared approach between tentative growth and monetary policy driven inflation management,'' he said.

Mr Chandrasekhar said he will present a study done by the Federation entitled 'Restoring the growth momentum and bringing back investor confidence' to the Prime Minister.

He said this document is in an expansion and a continuation of its study on the same subject released recently by the chamber.

''The focus on the financial sector is important but not enough.

Problem pertaining to the downstream real sector large and medium industries and exporters need to be addressed to ensure that there is no damage to the real economy,'' Mr Chandrasekhar said.

''The captains of industry would want to know from the government as to how it envisages maintaining the growth momentum for the years 2009-10, 2010-11 and the subsequent years,'' an industry source said.

Industry is of the view that growth so far has been primarily private investment driven.

The fundamentals of the Indian economy remains structurally strong and the current global banking crisis has left the Indian banking sector relatively untouched.

However, many months of tight monetary policy and its consequential effect on drying up domestic liquidity has forced Indian companies to look externally for financing.

This forced and increased international exposure has seriously compromised the Indian industry interest largely on account of turmoil in the international financial markets and the rapid devaluation of the Indian rupee.

In addition, the risk aversion that has suddenly crept into the domestic banking sector on account of international banking crisis has created a situation of deep concern and threat for the real economy and the players involved in it.

Both Mr Rawat and Mr Chandrasekhar claimed that the government has finally yielded to their suggestion to step up liquidity infusion undertaking the rate cuts and opening up further the External Commercial Borrowings route.

Mr Chandrasekhar said the reason to take deeper and more meaningful measures is simple.

India is in the middle of significant investment and expansion cycle, where businesses need excess to capital--both equity and credit.

Disruption of this expansion cycle mid-stream will have serious consequences for the real economy.

The industry will also highlight to the Prime Minister that controlling inflation should not occupy primacy in policy making.

Due to global contraction, inflation will moderate by next year.

Thus continuing obsession of bringing down the price level at the expense of growth is not warranted.

All and all, industry wants the government to bring the agenda of growth squarely on its table. Not doing so could spell doom.

UNI