Chamber sends SOS to Prime Minister

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New Delhi, Oct 9 (UNI) Even as government sounded confident about the Indian economy, saying its fundamentals are strong to withstand tremors sent out by the global crisis, business confidence of Indian corporate has taken a hit with Assocham seeking injection of Rs one lakh crore liquidity in the economy.

Quoting findings of its first quarter's business confidence survey, Federation of Indian Chamber of Commerce and Industry (FICCI) said hardening of interest rate and stricter credit availability has eroded confidence level of corporate India.

Dun and Bradstreet said business optimism dipped 28 per cent to 138.9 from 193.2 in last quarter of 2007.

Assocham has appealed to the Prime Minister to immediately take bold measures by injecting Rs one lakh crore liquidity in the economy. It wanted that cash reserve ratio and repo rate be simultaneously reduced by two per cent and three per cent, respectively.

The chamber also urged the government to take urgent measures to stabilise rupee before Indian industry is hit by casualties, leading to loss of jobs.

Reserve Bank, on Monday, slashed by half a per cent the rate of mandatory deposits that banks have to keep with it to ease the tight liquidity position. The new CRR rate of 8.5 per cent will be effective from October 11 and would unlock about Rs 20,000 crore into the banking system, according to RBI.

In an SOS (Save Our Soul) appeal to Dr Manmohan Singh, Assocham president Sajjan Jindal said foreign institutional investors be encouraged to invest up to 10 billion dollar in Indian corporate bonds with lock-in of inflows for one year.

Securities and Exchange Board of India (SEBI) has already relaxed restrictions by removing 40 per cent cap on overseas derivative instruments (ODIs), popularly known as participatory notes, in a bid to attract FIIs participation in the Indian capital market.

FIIs have already taken out eight to nine billion dollar from the Indian capital market to meet their liabilities back home in the wake of financial meltdown and this has led to depreciation of rupee. Rupee breached the 48 mark yesterday.

Assocham also demanded removal of ceiling of interest rate for external commercial borrowings, saying the current limit is out of sync with the market. It demanded removal of restriction on usage of ECB in domestic markets.

Currently domestic companies, other than those in infrastructure, can borrow up to 500 million dollar with RBI approval from overseas markets.

Citing quick actions taken by the United States, followed by some European Countries to bail out their economy from prevailing crisis, the chamber urged the Prime Minister not to lose time in taking bold measures by providing heavy doses of doles instead of smaller drips without worrying for the inflation.

Assocham claimed that inflation is mainly due to base effect and, therefore, the level of credit needs to be redefined taking into account the base effect while planning for the future instead of squeezing the credit which are having serious impact on the survival and sustenance of the industry.

Mr Jindal also appealed to the Prime Minister to urgently reduce repo rate by three per cent, permit the banks to borrow against government securities and make available dollars directly to oil companies rather than routing them through market.

At present, RBI lends money to banks at 7.75 per cent.


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