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Jun 12, 2012, 11.01 AM IST | Source: CNBC-TV18

Don't blame RBI for poor GDP, govt action vital: Munjal

Sunil Kant Munjal, chairman, Hero Corporate Services tells CNBC-TV18 that rate-cuts by the RBI alone do not suffice to boost growth. Fiscal initiatives and decisions by the government are equally vital.

Sunil Kant Munjal, Chairman, Hero Corporate Services

In an interview to CNBC-TV18, Sunil Kant Munjal, chairman, Hero Corporate Services says that rate-cuts by the RBI alone do not suffice to boost growth. Fiscal initiatives and decisions by the government are equally vital.

Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: The finance minister has rejected the report by S&P but hasn't rejected a snap poll by the CII or by any other independent agency which continues to maintain that GDP is likely to be lower than 7%. Pranab Mukherjee  announced this morning that FY13 GDP growth would be 7%....

A: I hope he is right. But as you know this was a snap poll done during the national council meeting of CII last week where members literally give their opinion at the table. It's clear that the business mood has been affected lately because of general slowdown in the economy and the government's inability to implement some of the big reforms.

The reality is that India is not worse off today than a few months ago, but when you conduct a poll, the mood always has an impact.

Q: Does industry feel that the Reserve Bank of India has crimped growth?

A: Actually, it's not the Reserve Bank alone. The economy is in the present situation partially because of extreme monetary tightening and partially because the government is unable to take fiscal initiative.  In the current situation, oil prices have softened over time and inflation has not gone up.

So there is headroom, according to a Reserve Bank deputy governor, to improve liquidity in the banking system and to lower interest rates at the same time. But it has been suggested that government also take fiscal decisions.

Q: How hopeful are you about some of those measures?

A: To my mind, it would be sensible to increase fuel prices at the same time to avoid any increased differential between petrol and diesel which may not be the best for the overall economy.

So I think the government needs to take a good hard look again at both what is happening within India and the globally.

Q: How disappointed is industry going to be if there is no cut in the CRR or repo rate on the June 18?

A: It would certainly be disappointing because as the economy and the industry suffer, the general investment mood has turned gloomy. Capacities are not being created across the board and though some of the smarter companies have started, most are still being driven by the mood in the system.

Q: Did the CII snap poll indicate that all expansion and capex plans are on hold?

A: Not all. A lot of respondents said that they would expand and invest. The Hero group of companies has announced major investment plans. However, the number of respondents who said that they would invest at last year's level or lower,  is large and growing and that's a bit worrying.

Q: Is the CII looking at any specific agenda as far as getting infrastructure projects off the ground is concerned?

A: The CII has suggested that the government should take 50 or 100 projects, pre-clear them within the next 30 days and then strictly monitor the implementation of these projects over an extended period of time. Implementation of large infrastructure projects spur waves of activity and investment  and of course once they are completed, they benefit the entire nation.

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