Industry confidence level improves: KV Kamath, ICICI Bank

ET Now: Speaking of Narendra Modi’s expectations, don’t you think there’s too much hope and money behind one man? Despite his good intentions, there are structural problems in the economy and even the Prime Minister doesn’t quite have a magic wand?

KV Kamath: If you look back 10 years ago, despite all the structural problems, the economy grew almost double digits. Now you have an executive who has a well-known penchant for fixing things and making sure things work. It’s the same structure, the same group of people driving this. You have the right leader who can drive the effort forward.

ET Now: We recently met Mr Birla with the Finance Minister and as he left the meeting he said he expected the economy to recover in three to six months. He says he will start investing in India now. We haven’t heard that from too many business leaders. They have a pulse of Corporate India vibes. When do you think business leaders will start investing?

KV Kamath: The first sense comes from the market. It is the collective wisdom of the market that there is action and we will move quickly. This improves the level of confidence in the industry. Now we need to see if some of the basic conditions needed to get people back into an investing mode will change. Today I read that a whole series of deadlocked reforms or projects will be tackled in the next few days. When that happens, you’ll see a sea change in investment mindsets, so to speak.

ET Now: It could happen itself in three months. Is that what you think?

KV Kamath: I think it could start between three and six months. But we want additional investments to be made. There is enough to reap in the first six months in terms of deadlocked projects and whatnot.
ET Now: The one clue that companies in India will also look forward to is budget. Given the nature of the mandate we have, the strength this government has in Parliament, would you expect severe reforms in this budget itself?

KV Kamath: I don’t want to call or question what someone is working on. But I think it’s going to be a budget where you’re trying to have budgetary discipline and whatever it takes to achieve that discipline. Well, to what extent, in what combination, is for the government to demand. I think one thing people will be looking for in the household is budgetary discipline and a way to get the deficit under control over, say, a three-year period. If it’s well constructed and well articulated, you’ll see the cheers rise.

ET Now: Does that figure of 4.1% sound a bit difficult to you?

KV Kamath: If you eliminate waste, eliminate what is theft and eliminate what is not needed, 4.1 is achievable.

ET Now: When do you think fiscal and monetary policy will work together? When do you expect a course reversal?

KV Kamath: When it comes to monetary policy, we always say that we should see the constructive shaping of a budget deficit. We know what it is and where it will end. Once they see that construct at stake for this year and, say, two years, so to speak, I think they should have more confidence to play with rates, or inflation itself has to start coming down. We see several people have proposed different solutions, starting with freeing up food supplies, pushing the pedal on APMC reform, and so on. Again, I’m sure the government will understand this very quickly and take any or any of the steps that would give policymakers the confidence to lower interest rates. We should see it in this fiscal year, in the next 12 months. I think it should start in the first six months.

ET Now: A quarter percent or more over the year?

KV Kamath: I don’t have a call for this. Let’s see what happens. Everything will depend on where the deficit number comes in and if you are able to bring the inflation rate down. If these turn positive, rates could move quickly.

ET Now: What are your growth prospects in the short, medium and long term?

KV Kamath: My long-term number does not have a single digit. It’s double digits. So you can make a guess.

ET Now: During the tenure of this administration?

KV Kamath: I think it will happen during the term of this government.

ET Now: The first semester itself?

KV Kamath: It will happen in the first term of this government. That’s for sure. If they move forward as they intend to, I’m pretty sure we’ll see double digits in the first term of this administration itself.