I am Excited about India Story, Think Recovery is on the Cards
Indian administration needs to make sure that its people are not left to the vagaries of monsoon, said Uday Kotak, managing director of Kotak Mahindra Bank. In an interview with Saloni Shukla, Kotak stressed that the government should build adequate infrastructure to avoid situations where people have to suffer from lack of water. He also said that he was betting big on the India story and expects private capex to return in a big way in the next 9-12 months. Edited excerpts:
Are we finally seeing the full extent of stress in the banking system? There is a stress issue in Indian banking which is not surfacing, and it took a long time for the system to accept that there’s an issue. And I think this needs to be dealt with. There are two parts to it — one, is the need for banks to really recognise the truth which is beginning to happen. The second is about resolution, and resolution of stressed loans is very stressful in India and we really need to de-clog the system.
What’s your outlook on credit growth? The government has begun to spend money on projects and I think it will lead to brownfield expansion by many Indian companies. We think working capital will start to get more positive, and at some point of time — maybe in the next 12-18 months — I would finally begin to believe in the Indian infrastructure. It is one of the best times for India to build India.
What about private capex? Private capex is beginning to see some early shoots of revival in brownfield projects, but we are still not seeing open-ended large projects. I think people will take investment calls about 9-12 months from now, but we will get there. The rural economy, if we have a normal monsoon, should get better. This reminds me of 2002-03, when we saw a significant recovery.
Is there a worry on savings mobilisation in the economy? The share of savings has dropped from 28% to 23%. So, you have a situation where the savings part of the economy is dropping. We are also seeing significant increase in cash in the economy, and customers are simply taking money out of banks and hoarding it. But we need the money back into the system, and for that to happen, the Indian saver needs to get a better deal.
You tweeted a few days back that India’s still looking at the skies for economic signals...Please elaborate. That is unfortunate and it does bother me that India, for all its progress in the 21st century, is not able to provide water to its people. Unfortunately, you can’t buy the skies with all the money, so we have to do the right things with right governance.
You have to fundamentally make sure that the core needs of Indians are not dependent on the vagaries of monsoon. And whatever investment we need to make, including desalination at whatever cost, people can’t be let to suffer because of lack of water.
A normal monsoon is important, but we also have to plan for a future where we are not at the mercy of the rain gods. We all hope for a good monsoon, but the solution lies in proactively being able to tackle the issue if monsoon plays truant.
I hope, for all our sake, that monsoon is good, so we can use that time to build for the future. What about the India story, is it still intact? I think so. I am excited about India. I think a recovery is on the cards, the banking system is finally dealing with stress, and we will hopefully de-clog in the next 12-18 months. I believe that banks have to move to an era of much greater efficiency and they have to give a good deal to their savers and at the same time ensure that they are pricing the risk of borrowers. And the most important point a bank and a borrower need to know is that if a bank has lent money — which is depositors’ money with high leverage — the borrower better pay up.