India's central bank needs to pump more money into the banking system to help local companies acquire assets globally, said Sajjan Jindal, president of the Associated Chamber of Commerce and Industry and vice-chairman, JSW Group.
The current global credit crisis has opened up opportunities for Indian companies to shop abroad, since many assets globally have become cheaper due to the crisis.
The government should follow a five-point strategy to pump in more money into the Indian banking system to keep the momentum of advantage India growth story, Jindal said in Mumbai.The urgent requirement is to reduce cash reserve ratio by another 200 basis points and repo rate by the same number to 7 per cent, which will infuse an extra Rs 80,000 crore into our banking system, he said.
Another suggestion is to remove cap on interest rate for non-resident Indian deposits and to facilitate money market mutual funds access the repo window.
In the wake of current financial turmoil, banks and financial institutions are unwilling to lend to each other and there has been a total breakdown of trust in the banking industry.
There is a need to guarantee inter-bank lending by respective countries central banks, regulators and fiscal authorities with better co-ordination, Jindal said.
Elaborating this, Swati Piramal, vice president, Assocham and director of drug major Nicholas Piramal said though big multinational pharmaceutical companies have adequate cash reserves to face the global crisis, small and medium scale research-driven pharmaceutical and biotech companies which are heavily dependent on external funds for survival, may find the going tough and this will open up acquisition opportunities for Indian companies.
Citing that real estate and infrastructure sectors are likely to be most vulnerable to the current crisis, Jindal suggested to create a $25-billion special fund from the foreign exchange reserves exclusively to be utilised by the ongoing and sanctioned infrastructure projects.
The government should also consider reduction in interest rate, especially for retail home loan buyers, upto a particular limit, such as Rs 20 lakhs.
Even for Corporate India, it is not viable to access loans at higher interest rates, he said. Unlike China, India's export dependence is only to the tune of about 20 per cent and the current global crisis will not much impact the operations of Indian firms.
The current liquidity crisis, which manifested only in the last one-and-a-half months, will not last beyond five to six weeks, considering the efforts of authorities in India and abroad, he added.
While commenting on the impact of the crisis, he said JSW Steel has been forced to postpone the commissioning of its integrated steel complex at Vijayanagar by about three months, to November.
