India’s government will meet with business leaders this week to discuss ways to spur economic growth after factory output and merchandise exports grew at the slowest pace in two years.
Prime Minister Manmohan Singh’s government may invite businessmen tomorrow, Commerce Minister Anand Sharma told reporters at a conference organized by the World Economic Forum in Mumbai yesterday. Factory production increased 1.9 percent in September. Exports rose 10.8 percent to $19.9 billion last month from a year earlier, according to Commerce Secretary Rahul Khullar.
The $1.7 trillion economy is slowing after India raised interest rates 13 times since March 2010 and Europe’s debt crisis cut demand for the nation’s products. Businessmen will ask the government to quicken approvals for infrastructure projects and ease land acquisition rules after anti-corruption protests stymied decision making, said Chandrajit Banerjee, director general of the Confederation of Indian Industry.
“Corruption, bureaucratic hurdles all are adding to uncertainties,” Ashok Hinduja, chairman of Hinduja Ventures Ltd. (HVL), said in an interview in Mumbai yesterday. “All these uncertainties are delaying our expansion plans.” He didn’t give details.
The government is taking fewer decisions after a minister, bureaucrats and company officials were jailed over graft charges related to airwaves sales. India’s auditor reported in November last year that permits to run mobile-phone services were sold at “unbelievably low” prices, estimating the potential loss to the government at $31 billion.
Corruption Cost
The number of cabinet approvals fell 39 percent to 33 in the first six months of this year from a year earlier, according to government data. Ministers passed 67 proposals in the first half of 2009 and 129 in 2008, the data show.
India’s gross domestic product growth could approach China’s -- more than 9 percent -- if corruption were reduced, according to a March survey of chief executive officers in India by consulting firm KPMG. Investment from abroad would rise if foreign companies believed corruption had been curbed, the CEOs said.
The Reserve Bank of India on Oct. 25 predicted India’s economy will expand 7.6 percent in the year ending March 31, lower than the 8 percent it estimated earlier. Governor Duvvuri Subbarao has increased the central bank’s repurchase rate by 375 basis points since the start of 2010. That’s the fastest round of increases since the monetary authority was established in 1935, Bloomberg data show. The repurchase rate is 8.5 percent.
‘Paralyzed’
Steel production by companies including Tata Steel Ltd. (TATA), India’s largest producer, grew 6.6 percent in September from a year earlier, compared with an 8 percent gain in August, the commerce ministry said on Oct. 31. Cement production growth slowed to 0.9 percent from 7.2 percent during the period, the statement showed.
“We need policy formulation that will aid fund flow into the country,” said Subba Rao Amarthaluru, group chief financial officer of GMR Group. “We have demand and opportunities here but you need capital.”
The government also needs to build roads, ports and power stations to increase access to goods and services in a country that’s attracting 11 million people demanding such services every year, ICICI Bank Ltd. (ICICIBC) Chief Executive Officer Chanda Kochhar said in Mumbai yesterday.
The government and the industry are moving toward the same direction “but we shouldn’t be saying that because of democracy we will be paralyzed,” Reliance Industries Ltd.’s billionaire Chairman Mukesh Ambani said at the conference in Mumbai. “That’s what worries me.”
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
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