Hyderabad, June 8 (IANS): The interest rates have to be lowered by 2 per cent if the Indian industry is to become competitive, said industry body ASSOCHAM on Thursday.
ASSOCHAM President Sandeep Jajodia expressed concern that the Reserve Bank of India (RBI), in its credit policy review on Wednesday, missed yet another opportunity to lower the interest rates and help revive the industrial and overall economic growth.
The ASSOCHAM managing committee, which met here, urged the union government to tackle interest rate, Non-Performing Assets (NPAs) of the banks and lack of demand in the core industries.
Jajodia called for flexible and pragmatic approach to deal with the NPAs of banks which have mounted to a whopping Rs 7 lakh crore.
The industry body called for extending to 180 days the 90-day period for converting standard account into an NPA for non-payment of interest or principal.
"Once an account is turned into NPA, the avenues for working capital are choked which hastens the curtains on the enterprise," he told a news conference.
The ASSOCHAM President said easing the 90-day regulation was needed especially for steel, power, telecom and infrastructure sectors, where the projects have high gestation period.
He said if large NPAs were resolved by the RBI in next couple of quarters, this would spur the credit off-take.
Noting that the GDP numbers were coming down for last two to three quarters, the ASSOCHAM President said various factors, including demonetisation, contributed to it. He, however, expressed hope that the effect of demonetisation would start to ease.
He said the core industries were facing the problem of lack of demand, resulting in NPAs.
Stating that Rs four lakh crore allocated to infrastructure sector in the Union Budget was the highest ever the country has seen, he hoped that higher spending would generate demand for steel, cement and other building materials and create more jobs.
He said the most difficult challenge faced by the country was to provide jobs to 12 million youths every year. He said the task became even more difficult due to lack of demand besides the US position on jobs to Indians and the jobs lost in IT sector.
The managing committee said the latest data of GDP for the fourth quarter indicated that NPAs and lack of private sector investment were the biggest road blocks for economic growth.
"Unless we bring a sustainable growth of at least 8-9 percent across the spectrum, we will not be able to generate jobs," it said.
The top policy making body of the apex chamber also took note of the July 1 roll-out of the Goods and Services Tax (GST).
"While the GST would no doubt be a game-changer for the Indian economy over a medium and long-term, the teething troubles cannot be ruled out. The tax authorities have so far been quite supportive and we hope that even after July 1 a friendly approach towards the tax-payers would be followed with a common objective of making the GST a success," it added.