Market meltdown to have minimal impact in India

New Delhi, May 26: Meltdown in the stock markets of the emerging economies will have a minimal impact on the investment climate in India, particularly in the manufacturing sector, Assocham President Anil K Agarwal said today.

Releasing the paper, 'Achieving 12 per cent Manufacturing Growth' for Finance Minister P Chidambaram, Mr Agarwal said while it was true that the cost of capital would go up for the business entrepreneurs, interest accounts for only seven to eight per cent of the total production cost.

As far as the meltdown in the markets is concerned, it was more of a notional profit or loss and would not have any impact on the ability of the corporates to raise money for growth.

''Excepting perhaps IPOs, the drop in the markets would not have much of bearing for the investment climate, particularly in the manufacturing'', Chief Economist, Reliance Industries and Chairman of the Assocham Committee on WTO T K Bhaumik said.

Mr Bhaumik who headed the Assocham panel for strategising 12 per cent growth in manufacturing said there were a lot of things which are possible for implementation immediately by the government even if there is a coalition of parties at the Centre.

''What stops them (the government) from changing the definition of small units. The benefits of the small scale should be linked to the employment generation and not the investment limit'', Mr Bhaumik said.

The expert paper said a 12 per cent growth in manufacturing output would need consistent eight per cent growth in core sectors, which have weightage of 27 per cent in the Index for Industrial Production. The core sector industries comprise coal production, electricity generation, crude oil production, refinery, steel and cement.

Contrary to what the government claims, the Assocham paper stated that the foreign direct investment surge is not happening. ''FDI inflow is not matching global perception of India's current performance and potential'', the paper said.

Cumulative infow (1991 - Jan 2006) is 37.7 billion. Issues like cost of entry for FDI, cost of doing business, supporting IPR regime and labour laws have not been addressed, it added.

The paper said the automobile model should be replicated for the rest of the sectors. In the autombile sector, domestic liberalisation motivated the indigenous industry into restructuring, consolidation and modernisation of its operations.

Stressing the need for labour reforms, the paper said the Industrial Disputes Act, 1947 and Trade Union Act, 1926 should be amended to improve labour productivity and increase employment.

UNI