The land acquisition is a major issue for the industry, according to B Muthuraman, president, Confederation of Indian Industry (CII) and vice chairman, Tata Steel Ltd.
In an interaction with reporters on the sidelines of CII national council meeting in Chennai, Muthuraman said the major issues for the industry today were land acquisitions, cost of capital and commodity prices.
According to him, industry only occupies three per cent of the total land available in India. If it were to grow by 25-30 percent, it can only occupy 10 per cent. "The land acquisition is a major issue for the industry, to address which the land records need to be digitalised, after which the government should look at mapping zone-wise for the industry growth," he said.
He added that it was not practical for the industry to acquire land for industry purpose. To address the issue, CII has placed a proposal with the Planning Commission with the idea of creating a land corporation in every state across the country with private participation and with a business objective, he said.
The rising interest rates leads to increase in the cost of capital, and is a matter of concern for the industry. Any further rate hikes by the Reserve Bank of India (RBI) will hurt the industry growth, he said.
“The cost of capital needs to be moderated. Because of interest rate, already slowdown has started in the industry. In the last 15 months, interest rates went up by 10 times. Any further increase by RBI will affect the growth and hurt the industry.”
According to him, the gross capital formation growth was only 0.5 per cent last quarter compared to 24 per cent growth in the first quarter of last year. FDI flow dropped to $27 billion in the last fiscal from $38 billion in 2009-10, a drop of around 28 per cent. Credit growth, especially to infrastructure sector, including petrochemical, iron and steel, cement, power, roads sand others, is not good. Private consumption has started slowing down.
Commenting on the country's GDP growth, he said, "From the world's perspective, India's GDP growth rate of 8-8.5 per cent is a good number, but ideally we must growth by 9.5-10 per cent, looking at the domestic challenges. For which, supply side needs to be addressed, agriculture productivity need to be increased, money should be available for private sectors to increase investments into core sector."
The government's diversification programme is not happening as per schedule and it has to be put on the fast track, land acquisitions stagnating the industry and reforms need to be speed up.
On the reforms for example GST implementation has to be speeded up, Muthuraman said, adding that GST alone can increase country's GDP by 1-1.5 percentage points.
