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Cut prices, Chidambaram tells industry

NEW DELHI: Union Finance Minister P. Chidambaram on Tuesday advised various sections of industry to reduce prices to induce consumer demand. At the same time, he assured India Inc. that the government was alive to its problems in the wake of the global financial crisis and would consider excise duty cuts for sectors severely affected by the slowdown.

Addressing corporate honchos and business leaders at the India Economic Summit here by the World Economic Forum and the Confederation of Indian Industry, Mr. Chidambaram said: “Hotels must cut tariffs, airlines must cut prices; real estate must cut rates of apartments and homes they sell; car makers and two-wheeler makers must cut prices. Any sector faces problems, I am open to examining suggestions on cut in excise duty rates.”

Mr. Chidambaram said a cut in prices was the time-tested response to a demand slowdown as lower prices would stimulate consumer spending at a time when the output of manufacturing and other sectors was falling and would lead to a decline in economic growth. “That [price reduction] is a much better option than allowing inventories to build up, non-performing assets, lay-offs and retrenchment and digging a deeper hole,” he said.

Although such a step would lead to profit and loss accounts taking a hit,“it is much better to keep your market share, keep your loyal workers with you, by taking a price cut.”

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