Bharatiya Janata Party’s sweeping victory in the UP elections will give the government the additional momentum needed to drive its reforms agenda further and faster, said New Development Bank president KV Kamath.
The Indian economy is set to boom, Kamath told ET in an interview, adding that demonetisation had been a success, allowing India to leapfrog the digitisation timeline. In Delhi for NDB’s annual meeting, he also said that India does not have the funds to set up a bad bank, one of the methods suggested for resolving banks’ rotten assets problem.
Under his watch, NDB — popularly called the BRICS Bank — has done about $1.5 billion in lending in its first year. Kamath, a veteran banker selected by India to head the new institution, expects to double that in the current year. The bank plans to raise up to $500 million through masala bonds to fund its India loans.
Kamath pointed out that the political “noise” that’s attended the poll result in UP is only heard within the country. From overseas, India is seen as the “brightest spot” with an attractive infrastructure story amid global economic uncertainty.
“Probably this victory will give the government the momentum required to get a whole lot of things done,” he said. “The steps taken, particularly this year, and the government’s ability to perhaps act even at faster pace augur very well for the country.”
Four GST-related Bills were passed by the Lok Sabha on Wednesday, marking a big step towards its rollout from July 1.
Kamath said even before the UP results, the government had done a fair bit.
“The passage of GST, the successful execution of demonetisation and a whole lot of things that have been done in past two to three years I think indicate the bias for action that the government has,” he said, adding he is bullish on India.
“Three years were spent trying to get the economy re-spinning at pace and I would think that part is done. Now the opportunity is to drive it at an even faster pace. I think things are well set to drive it at a faster pace,” he said while flagging weaknesses in parts of the private sector and the banking sector as challenges.
“Urgency to fix these quickly and set a tight timeline — I think then the economy should be firing on all cylinders,” Kamath said.
BJP‘s victory in UP and the subsequent appointment of Yogi Adityanath as CM has raised some concerns, but that does not seem to be an issue outside the country. “I don’t hear the noise where I am in this context. It doesn’t get reflected globally. Where I sit, India is still looked at as (the) brightest spot amongst comity of large economies,” he said.
A few years ago he would have cited India’s demographic dividend and other features were the big attraction, but now Kamath has a different view. “Those things are all given. What I find now is the large infrastructure gap in the country that can be very productively filled,” he said.
“The act of filling it itself will generate economic development,” he said. “And the fruits of this development itself will generate returns for next 20-30 years. This is the most exciting thing to me about India.”
He said demonetisation was a success and the economy seems to have bounced back. “The timelines that were articulated to get remonetisation in place have been met. The impact of demonetisation in terms of sucking out the black money in the system — the first part is done. Now we will have to see the impact in terms of the tax collections through this,” he said, pointing to the success of crucial elements of the currency swap.
He said the bigger success of demonetisation was that it has hastened digitisation.
“We are at a minimum at least five to seven years quicker because of this exercise,” he said.
He said NPAs were an issue but did not agree with the idea of a bad bank because of the difficulty of finding the funds for this.
“I don’t see the money,” said the career banker, suggesting NPAs need to be resolved in-house by the banks.