I am Ex­cited about In­dia Story, Think Re­cov­ery is on the Cards

The Economic Times - - Smart -

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.

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