"One of the biggest problems that the country is facing today is the declining growth rate of our GDP. Last year we had a 6.4% growth rate, while in the January to March quarter of the same year it was even lower at 5.4%," said Godrej, who also said that the theme CII has chosen for the ongoing financial year is 'reviving the growth through reforms and governance'. In 2008-09, the country's GDP growth was 6.7%.

"We were able to come out of that (2008-09) global financial crisis quite well because we were provided with a strong fiscal and monetary stimulus," said Godrej, adding that the biggest single reform that could solve a fair amount of macro economic issues at present, is the introduction of the goods and services tax (GST).

"We expect the introduction of GST would increase the GDP growth rate by 1.5 percentage points, with other things being equal. It would be a tremendous macro-economic stimulus which could help reduce the fiscal deficit and could help contain inflation," he added.

The other reforms that could revive the economy, according to Godrej, were the opening up of foreign direct investments (FDI) in sectors such as aviation, defence, multi-brand retail, and insurance.

Godrej said, "The perception about investments in India is not good, particularly post the retrospective amendments that came with the budget, which has even been identified by the Prime Minister as one of the reasons for negative perceptions."

The recent labour incident at Manesar and the grid failure have also created a negative perception, he said. Investment sentiments have also suffered because of the high interest rates, he said.

"We have suggested to the RBI that steps should be taken to reduce the repo rate, reverse repo rate and the CRR. If these measure are taken then I think investments will gather momentum and growth will be restored," said Godrej, and added, "All growth measures must be done in conjunction. Only one set of actions won't help. A combined action front to revive growth is the need of the hour."

Godrej said the savings rate needs to be increased, and new savings channels need to be opened. "Too much money has been invested in gold in our country in the last financial year, which has led to a deterioration in balance of trade," he said, and pointed out that $60 billion of gold imports took place last financial year.

On corruption affecting the investment climate, Godrej said, "We must see an increase in transparency and reduce corruption" Elaborating on the measures that need to be taken, he said, "One is the process that is currently going on which is to have an ombudsman type of constitutional authority, what is called as Lokpal. But, to our mind, that is not enough. That is necessary but not sufficient to improve transparency and reduce corruption."

Godrej also stressed the need for Parliament to run normally. "There might be various accusations and reports, but CII feels they should be debated in Parliament and I do hope Parliament resumes, because if Parliament doesn't work then various pieces of legislation pending in Parliament will get delayed.

via timesofindia