Agenda for India: Industry

TwoCircles.net presents “Agenda for India”. Series editor is Charu Bahri.

Challenges & Solutions

Soeb Fatehi, Principal Consultant, Encode; Director, Control Panel and Switchgear Manufacturers’ Association and sitting member, Western Suburb Center Committee, Bombay Management Association & Electronics and Telecom Committee, Indian Merchants Chamber shares his outlook on the foremost challenges facing Indian industry.

“The government is not moving fast enough on infrastructure projects. The sanctions are there, the barriers of licensing have been removed but projects are still not happening. The government appears to be procrastinating on the execution of these projects.”

The Australian Industry Group, a key representative of manufacturers, has welcomed increased spending on transport infrastructure. (ABC News)

“The government must also wake up to the value of India’s domestic market. At a time like this, when markets across the world have shrunk and the export of Indian products to major economies like the USA and Europe have shrunk to less than 50 percent of their normal levels, India has the potential to survive the crunch and come out better than the erstwhile economic superpowers because of its own large markets.”

“If the government were to examine history books and study the famines of the second half of the nineteenth century, it would find that some of the greatest projects in India and overseas, be it irrigation or road projects like the Pilgrim Road (part of the Grand Trunk Road), were built during periods of famine. When the monsoons failed, the rajas and the governors would offer their people food for [infrastructure development] work. It is about time our government gets cracking on the same lines. Infrastructure projects could employ many, and thereby help domestic markets overcome the ongoing crisis of confidence. Such projects may reap lower profits than what is usually expected in normal times of trade, but will help the country tide over the difficult situation.”

“The fluctuating cost of finance is also of concern to the Indian industry. As it is, the Indian industry has struggled to expand bearing a higher than usual cost of finance. While these rates have been lowered in last four years, our rates are still typically two or three times prevailing international rates.”

“The government needs to adjust the prevailing rates of finance to suit market conditions. Otherwise, small to medium enterprises will find it very difficult to plan their capital inflow on a long-term basis. In the short term as well, they would have no choice save to borrow at high rates and forgo growth provision budgets.”

“Another concern to industry is the rising cost of energy. While I acknowledge that there is a difference between control and regulation, I am certainly in favor of regulation of energy costs, which are nowadays rising sans reason. In recent days, there was a riot at the Reliance Energy head office in Santa Cruz, Mumbai. While the riot may have been reported as politically motivated, it is also true that politicians can’t get people out on to the streets unless they are aggrieved in the first place.”

“The government needs to take a serious look at energy. If it connects this subject with my first issue of infrastructure, it would realize that now is an opportune time to buy capital equipment for the power sector from European and American producers – when the chips are down, reputed companies in the developed world would offer capital equipment at competitive prices, and at present, exchange rates are conducive too.”

“Another area that is to be marked out for special attention and nurturing is the telecom sector along with the growth of computerization in all services including governance. I foresee that our government shall have to create innovative ways of reaching the benefits of India’s IT prowess to every remotest rural and tribal village.”

“All said and done, I am comforted by the Prime Minister’s efforts to include the right people in the new government. It is very enthusing to see the vigor with which the new government is committing its timelines for reforms, and I am confident that things will look better in six months.”

Series Home: http://www.twocircles.net/special_reports/agenda_india.html