FM asks auto companies, realty firms, airlines to cut prices

[Sukumar.N]

FM asks auto companies, realty firms, airlines to cut prices
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Calling upon the automobile manufacturers, realty firms and airlines
to reduce prices, Finance Minister P Chidambaram promised to consider
excise duty cut for the sectors which are facing the heat of global
financial meltdown.

"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 said, while addressing industrialists at
the Indian Economic Summit being organised by the World Economic Forum
and the CII at New Delhi on Tuesday.

The Finance Minister also promised to examine the possibility of
excise duty cut if required.

"Any sector faces problem, I am open to examining suggestions on cut
in excise duty rates," Chidambaram said.

India, he said, will record satisfactory growth in the current fiscal
and the Gross Domestic Product (GDP) growth rate will bounce back
during the next year.

Responding to the suggestion of Chidambaram to lower rates to generate
demand, CII president K V Kamath said that industry would cut prices.

"Price cut is an initiative that industry will take. I think this is
going to happen", the CII chief, who is also the managing director of
the largest private sector lender ICICI Bank, said.

While pointing out that the time-tested response to demand slowdown
has been to cut prices, Chidambaram said, "That is a much better
option than allowing inventories to build up, non- performing assets
(NPAs), lay off and retrenchment and digging a deeper hole."

As profit and loss accounts will take a hit, he said, "It is much
better to keep your market share, keep your loyal workers with you,
taking a price cut."

Referring to the external sector, the Minister admitted that "there is
pressure on the rupee but once the flow is reversed, as we believe it
will, ...it is quite possible that the rupee will climb upwards."

At the moment, he added, "There was a huge demand for dollars mainly
coming from oil companies and others who have to meet the payment
obligations. But it is quite possible that in a month or two that the
direction of flows can reverse... and the rupee will settle at a
appropriate level."


N.Sukumar
Research Analyst
www.kences1.blogspot.com