The lingering shadow cast by rising inflation, which has soared to 
a four year high of 7.8% for the week ended 4th September,
is causing serious concern about its repercussion on the 
competitiveness of the economy in general and industry in particular.
Government's announcement that measures are being taken to
arrest the inflationary pressure, one hopes, would be effective
so that it does not have an adverse effect on the growth impulse.

What is specially worrisome is that the hardening of product prices would have an adverse 
impact on industrial performance. The rise in key input prices-iron and steel, basic metal
alloys and metal products-would raise the cost of production thereby squeezing the profit
margin of industry, ultimately affecting industrial competitiveness. If cascading effect remains
unchecked, the result would be an adverse fall-out on investment, especially among a large 
number  of units that have just been managing to cover their costs.

Hence it is important that measures to curb inflation are announced swiftly so that the 
uncertainty in the  market place is ended. Simultaneously, it is important to ensure that 
policy measures strike at the root cause of inflation so that appropriate measures can be 
taken to tackle the problem. Again, inflation has to taper down gradually so that growth 
is not weakened.

Hence, I am particularly perturbed by the recent hike in Cash Reserve Ratio (CRR) by 0.5% 
to be implemented in two phases. It is expected that it will mop up around 8500 crores 
whereas the excess liquidity is Rs. 50,000 crore. In my view this measure to soak up liquidity 
may soften inflation but will choke up industrial growth. Instead, the government should aim 
at curtailing administrative expenses as a remedial measure to combat inflation. I feel that a 
3% hike in DA for government employees at the time of raging inflation is totally uncalled for.

We all agree on the impelling need to revive demand by increasing investment in the 
economy. What would be better than encouraging new investment projects in the housing 
sector in particular and infrastructure sector as the macro objective. The world over, 
the housing and construction industries have been recognized as a vital segment for 
propelling economic growth and creating employment in the country. But despite the 
primacy of place bestowed to the housing and construction industry, the growth of this 
sector leaves much to be desired. The demand for houses far outstrips its supply and 
there is an estimated shortfall of around 40 million dwellings. As a result, the country 
would need resources worth Rs. 2,00,000 crore to construct them..

International experience also suggests that it is economical to create new cities than the 
effort to upgrade existing ones. The need to create new towns be hardly emphasized, 
particularly as the existing ones are bursting at their seams resulting in unplanned, 
haphazard growth, leading to a sharp deterioration in the quality of life. In fact, a look back 
presents a depressing scenario. During the five decades after Independence, we have not 
even been able to create new cities equal to the number of decades we have lived with. 
The Urban Development Policy needs a thorough relook to evolve time bound strategic 
action plan. Such a bold approach, besides the fundamental advantages, would open up 
new vistas for employment through private sector participation. Our Chamber has made 
a beginning to highlight the above by organizing conferences on 'Housing and Infrastructure 
Development in Uttar Pradesh: The engines of growth' at the State Capitals. Encouraged 
by the Lucknow Conference, similar conferences are being held at Bhopal, Jaipur and other 
capitals in our region.

(Ravi Wig)
President