The CII president, Rajesh Shah, told The Financial Express on Wednesday that finance minister Yashwant Sinha has already extended his support for the sector-specific approach. The government, he said, should focus on heavy commercial vehicles, steel and cement which are the key sectors with substantial investments.

Shah said that the recent policy announcements on information technology were welcome adding that a sector-specific approach was essential for other segments to give a further momentum.

He said that non-banking finance companies (NBFCs) with a good track record should be encouraged for funding the small decentralised sector, second hand vehicle segment andhousehold sector and added that RBI, while recognising the significance of NBFCs, had announced no policy measures.

He said that the credit policy was an important government strategy to re-invigorate the economy and the monetary policy could have addressed the slide in industrial growth and sentiment. "The RBI governor has made it clear that the cut in interest rate was possible only if there is a cut in various subsidies," he stated. The CII felt that the government should revamp subsidies, arrest leakages and improve delivery systems.

Shah stressed the need for financial management, deregulation, procedural changes to keep the pace of liberalisation and contain the fiscal deficit. He said that the Companies (Amendment) Ordinance, 1998 on buyback of shares, intercorporate loans and investments and sweat equity were steps in the right direction to boost sentiment. "However, buyback of shares would only benefit cash-rich companies if it is allowed only for extinguishing purposes (for example capitalrestructuring and not for treasury operations)."

The CII president called for new instruments such as non-voting shares, derivatives and tax on the short term profits by bear operators. He said that the Sebi guidelines should be fair and transparent in range, time and number of dealings. Absence of tax measures like Section 80CC, 10 per cent Capital Gains Tax for domestic companies were preventing investors from entering the capital market.

Shah expressed concern on prices of essential commodities which had led the Consumer Price Index for industrial workers to rise at a five year high of 16.3 per cent. "The government measures to correct the artificial shortage have been delayed. However, now it should act quickly as this is a situation of stagflation with low growth, high inflation and high interest rates," he added.