The Telegraph
Since 1st March, 1999
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CEOs hope Jalan will keep rate-cut word

New Delhi, Sept. 29: CEOs are still optimistic of a double-digit industrial growth this fiscal and feel that a reduction in the bank rate, as promised by the Reserve Bank of India in its mid-year monetary policy, would help strengthen and sustain the industrial revival.

The snap poll, conducted by the Confederation of Indian Industry (CII), revealed that 70 per cent of the respondents are looking forward to growth rates between 10-30 per cent, and only 9 per cent of the CEOs expect a growth rate of above 30 per cent. At the same time, 42 per cent predicted that their profits would fall between 10-30 per cent.

The Index of Industrial Production (IIP) for April-July 2002 has exhibited a 4.7 per cent growth, compared with 2.3 per cent posted in the same period in the previous fiscal. Most CEOs felt that to sustain this trend, the forthcoming mid-year review of the monetary policy by the RBI should incorporate a 50 basis point reduction in the bank rate.

The IIP figures have shown that the capital goods industry is also showing signs of revival and has grown by 5 per cent during April-July 2002 against negative growth in the last fiscal. About 64 per cent of the CEOs felt that the reduction in the bank rate would lead to a moderate increase in investments while 17 per cent said it would significantly boost investment.

The respondents feel the late and weak monsoon would at best affect the growth rate by a negative 1 per cent and, in that case, the RBI forecast of a 6-6.5 per cent growth rate can be revised by 5-5.5 per cent.

However, the respondents were not very confident of any improvement in the trade balance of the country due to the increasing prices of crude oil and growing uncertainties in the Gulf region. Another 73 per cent felt that if the current trend of high international prices of petroleum continued, it would have a significant impact on the trade balance.

The respondents were less concerned about the continuous appreciation of the rupee against the dollar, with 76 per cent feeling that the stronger rupee would have a moderate impact on export growth.

They feel that the recent controversy regarding the disinvestment process would affect the market sentiments to a certain extent but was unlikely to have any “spill over effect” on other reforms. Sixty per cent felt that the effect on the markets would be crucial. As a way out of the deadlock, they suggested that the government could shift its focus to smaller PSUs to keep the disinvestment process going.

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