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Assocham criticises S&P rating cut on India

ASSOCHAM has called for a big dose of political courage to halt the negativity being spread by vested global agencies and reverse the on-going decline in investor confidence.

At a meeting with the Prime Minister Dr. Manmohan Singh today the ASSOCHAM President Mr. Rajkumar Dhoot submitted a memorandum suggesting measures to tackle issues like high fiscal deficit and inflation on a war footing.

Talking to the media, Mr. Dhoot dismissed the Standard and Poor’s assessment of the Indian economy and said there is nothing in the report which is revealing or new . It looks as if the researchers have compiled together newspaper clippings and put out a paper, which is quite damaging for an economy which is among the top five in terms of purchasing power parity.

Some of the comments in the report about the political and government leadership are uncalled for, to say the least. Some of these comments are quite a drawing room talk, that too in a loose fit, the Chamber Chief said.

Strangely, the ASSOCHAM President said, these comments come from an agency which had given AAA ratings to some of the junk financial products in the run-up to the global financial crisis of 2008-09.

“Let India and other emerging countries not become whipping boys for these global agencies. They do more harm than good to us in terms of building a worldwide negative perception” said Mr. Dhoot.

“Let us not get rattled by these rating outlook and the threats. The Indian economy has an inherent strength and we never had any record of default in any of our international obligations”.

Mr. Dhoot emphasized the need for reversing the negative perception build by some global organizations including the multi national rating agencies. ASSOCHAM delegation urged the Prime Minister to put the House in order to face the challenging times and faced the rough weather with courage.

Mr. Dhoot said we cannot remain in self-denial mode. Despite global slowdown, India’s infrastructure story is in tact. The best thing about the Indian infrastructure is that for the next 20-30 years, there would always remain a demand for the sectors like power, roads, ports, airports, containerization. On top of it, we need huge investment and there is a great scope for investment , both public and private in building of social infrastructure like schools, colleges, universities and hospitals. He emphasized the need for strong private sector involvement.

The delegation urged the Prime Minister that without loosing time, Government should clear the big time infrastructure projects may be in the next three months. We also appeal and urge the Reserve Bank of India not to get misled by the headline inflation, which is around seven per cent. The core inflation is much lower clearly suggesting that there is a lot more scope to cut interest rates and generate demand in the system.

While the recent GDP data suggests deceleration in the investment to GDP ratio at 29 per cent, this is an issue which requires medium to long term solution. The immediate solution would be to generate demand since the industry has unutilized capacity. Once that is achieved, the consumer confidence will automatically boost investor confidence.

We also appreciate initiatives like the new manufacturing policy and some high profile projects like Delhi Mumbai Dedicated Freight Corridor, Delhi-Mumbai Industrial Corridor.

However, Mr. Dhoot suggested the Prime Minister to relook at the incentives being taken away from the Special economic zones, which can be a huge investment drivers. The investment in some of the projects put on priority by the Government is above Rs two lakh crore this year which alone can act as a great multiplier. He submitted the Prime Minister that while the investigative agencies do their job to probe the allegations of irregularities in the allocation of coal blocks , it is of utmost importance that all the stakeholders, including the government and the industry should move with a much faster speed to ensure that enough coal is mined and dispatched to the thermal plants.

It is nobody’s case to defend any wrong-doings. But to hold the entire sector, which is a lifeline to the economy, to ransom would deal a deadly blow

Mr. Dhoot said while idea is not to pinpoint faults with the Coal India, it is a worrying fact that coal production has lagged much behind the demand and the worst hit are the infrastructure sectors like power, steel and cement. Several of the power projects, including the ultra mega power projects (UMPPs) . We are being forced to import of coal from countries like Indonesia. Unfortunately, even some of the coal blocks bid for the Indian firms overseas are also facing different problems.

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