Finance Minister proposes, India Inc disposes

Chidambaram exhorted industrialists to cut prices in order to lure demand and boost growth, but India Inc gave a muted response. HT Correspondent reports. See graphics

Finance Minister P Chidambaram on Tuesday exhorted industrialists to cut prices in order to lure demand and boost growth, sweetening his appeal with the hint of a possible cut in excise duties. But India Inc gave a muted response.

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"Hotels must cut tariffs, airlines must cut prices, real estate must cut rates of apartments and homes they sell, carmakers and two-wheeler makers must cut prices,” he told industry captains at the Indian Economic Summit organised by the World Economic Forum and the Confederation of Indian Industry (CII).

Chidambaram also promised to examine the possibility of an excise duty cut.

He said cutting prices of products and services was a more prudent move than reducing costs through cutting production and retrenching employees. “That (cutting prices) is a much better option than allowing inventories to build up, non-performing assets, layoffs and retrenchment ... and digging a deeper hole,” he said.

“It is much better to keep your market share, keep your loyal workers with you, taking a price cut,” Chidambaram said.

Industrialists said they were not considering any immediate price cuts to tide over the crisis.

An analysis by HT showed that the real estate sector was operating with a net profit margin (net profits after tax expressed as a percentage of sales) of 49.6 per cent, followed by information technology firms (21 per cent) and metals (18.3 per cent ).

“Price cuts are unlikely to spur demand,” said Brij Mohan Lall Munjal, chairman, Hero Honda. “Minimum wages are
increasing, fuel price has increased..., so how do we bring down the prices of our products?”