The Indian economy is not over-heated yet. And the slowdown coming a bit too early is a matter of concern, a spokesman of the Federation of Indian Chambers of Commerce and Industry (Ficci) had said early this week.
The chamber will write a letter to the Prime Minister and other concerned ministers to know whether the economy had hit the recessionary orbit or the slow down was just part of a cyclical phase, he added.
It is true that industrial growth is giving warning signals. Growth is coming down, deputy secretary general of the Associated Chambers of Com-merce and Industry (Assocham) S R Bharucha said when asked if his chamber considered recession a possibility now.
The Confederation of Indian Industry (CII) too has voiced concern saying industrial growth would slow down in 1996-97, unless government heeded the warning signals of sluggishness in the economy.
The Federation of Indian Export Organisations (FIEO) President P K Shah predicted a reduced export growth of 12 per cent this year against about 21 per cent in 1995-96 and said exports did not appear to be a priority of the United Front government.
Most chambers have reacted to news reports regarding finance minister Chidambaram's concern over a possible recession and his subsequent meeting with C Rangarajan, governor of the Reserve Bank of India which is still finalising the credit policy for the second hand of 1996-97.
The Ficci, however, toned down its earlier stand and said in a statement that the slow down, though would not turn into a recession, should not be allowed to drift as it could have a deleterious impact on the economy.
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Bharucha, on the other hand, said the sharp decline in the import growth would not have occurred had the industrial boom continued and the present slump was a bit too sudden as the growth should have continued for another two years to complete the cyclical phase.
Ficci deputy secretary general Y P Srivastava said the government should immediately take measures to bolster the capital markets and disclosed that the chamber was organising a seminar on the issue later this month in Mumbai.
Not only should the government allow use of shares as surety against bank advances without any limits or reservations, it must also eliminate double taxation on dividend income, he added.
Hoping that the busy season credit policy would bring down the prime lending rates, Srivastava urged the banks to fix the interest rates in a competitive environment and not join hands in keeping the cost of credit high.
CII director general Tarun Das had stated that constraints of liquidity crunch and high cost of credit had led to postponement of new investments and cancellation of projects.
P K Shah of FIEO said exporters should be provided bank credit at the prevailing Libor (London inter bank offer rates) to remain competitive internationally while keeping in mind that the domestic market was appearing more lucrative.