JEDDAH, 2 May 2008 — The inflation and price-rise that is being witnessed in the Gulf and in other parts of the world are a temporary phenomenon, according to an economic expert.
“Recessionary trends in the United States and the weakening of the dollar have been adversely impacting world economies, contributing to the trend of rising prices and inflation,” Arun Patankar, co-chairman of the Confederation of Indian Industry’s (CII) Gulf Council, told Arab News in an interview yesterday.
“Things are, however, showing signs of improvement in the US economy, although the country is very much engaged in the presidential election, and so sooner or later they will have a positive impact worldwide,” he said. “We expect the new president to come up with a policy that will start reversing the recessionary trends.”
Speaking about the prices of some essential items, including rice, going up, Patankar said, “It is a matter of demand and supply.”
He added that rice prices are going up because of the ban imposed by India on its exports and that the Kingdom could be among the countries affected, as India is a major exporter of rice to the Gulf. Patankar said that India’s domestic demand for rice is growing due to a shortfall in production and, so, the government is meeting domestic requirements with available rice.
He said it was wrong to assume that India was losing its grip on the manufacturing sector. “In India, manufacturing has not gone down,” Patankar said, adding that India remains a hub for manufacturing goods with attention paid to quality and competitive pricing.
Of course, the country excels in the services sector and that will play a crucial role both within the country and overseas, Patankar added.
In 2006 and 2007, industrial production grew by 10.9 percent and the manufacturing sector by 12.3 percent over the previous year. The construction sector rose by 13 percent. “What we could not achieve was the targeted export of manufactured goods by 15.5 percent and industrial goods by 26 percent,” he said.
Since 2006-07, the economy has grown by 19 percent, financial and real estate sectors by 11.1 percent and trade by 13 percent.
India’s foreign direct investment has increased by $6.08 billion in 2005-06 to $14.4 billion in 2006-07. The Indian economy has maintained an average growth of eight percent in the past few years.
“Due to the adverse economic indications, the growth will drop this year, but in any case will not go below five percent,” he said.
Patankar said that business relations between Saudi Arabia and India had not made much headway despite high profile visits by the leaders of both the countries and a regular exchange of business delegations.
“Both sides keep talking of traditional relations but nothing seems to happen beyond that. There is a need to educate businessmen in both the countries about the advantages that they can have in doing business with each other. Both sides need to increase their confidence in each other,” he added.
The Saudi economy remains buoyant. With its plan to establish King Abdullah Economic City and five other cities, there is a tremendous scope for Indian businessmen to present themselves as one of the major key players in this part of the world.
“Appropriate efforts need to be made at the policy framing level by both countries, and the CII and similar organizations could play a crucial role to forge close business ties,” he said.
Patankar, who had a meeting with Jeddah Chamber of Commerce and Industry Secretary General Mustafa A.K. Sabri yesterday, said his interaction showed that the JCCI was keen on hosting the fourth GCC-India Industrial Conference.