Prices can fall if taxes, interest rates are lowered: Assocham

New Delhi, Nov 20: Prices in India may come down due to lower demand but will fall further if the government cuts taxes and banks lower interest rates, a top industry lobby said Thursday, two days after Finance Minister P. Chidambaram asked India Inc to cut prices and not production.

"We came to the conclusion that prices are a function of demand and supply and since demand has come down prices have begun to come down and may come down further," said Sajjan Jindal, president of Associated Chambers of Commerce and Industry (Assocham).

"But if taxes that were imposed in good times are reviewed and revised in view of the bad times now prices will come down further," Jindal told reporters after a meeting of the chambers' full committee.

The Indian equities markets have been very badly hit by the current global meltdown because of a crisis of confidence and the real estate industry has been badly affected because of high interest costs, a top industry lobby said here Thursday.

"A crisis of confidence is affecting the stock markets and real estate market has been affected because of high interest and other costs," said Sajjan Jindal, President of industry lobby Associated Chambers of Commerce and Industry.

His comments came against the backdrop of the finance minister asking India Inc to cut prices and not lower production, calling such a strategy the best solution to counter a demand slowdown.

Jindal also said banks must should more credit to small and medium enterprises (SMEs) if the economy has to pick up momentum. "Two months back banks had stopped giving even working capital but now they are writing to industry that they have surplus funds," he said.

"Still there is a crisis of confidence and banks must allot 20-25 percent of their funds for SMEs and extend credit at lower interest rates," he added.

K.P. Singh, chairman of India's largest real estate firm DLF, said that housing and construction were key to reviving the entire economy and wanted the government to bring down interest costs and roll back taxes that were imposed during boom times.

"But we are happy the government has decided to come out with a package to bring down interest rates," Singh said, adding "Once that happens real estate demand is sure to pick up, housing and construction activity will pick up and boost the entire economy."

Jindal, however, said Assocham is greatly appreciative of the steps taken by the Indian government to inject liquidity into the system and said that as a result of these steps, demand has already begun to pick up.

"Our government is doing a lot more than what any other government is doing and demand has already begun to pick up," Jindal said.

"Liquidity has gone up and as a result demand has begun to pick up and things should improve considerably within the next two months," Jindal said.

Regarding the steel industry, Jindal said that the industry is preparing a case as to why the government should impose anti-dumping duties on China, Thailand, Commonwealth of Independent States (CIS) and South Korea.

"We are preparing the papers and will give them to the government as soon as they are ready," Jindal said.

He said steel demand has begun to pick up as liquidity has gone up and also oil and gas companies have launched many projects.

Jindal said his own steel company, JSW Steel, would begin working to full capacity from the beginning of December. Now capacity use is about 80 percent, he said.