New Delhi: The government’s immediate priority has to be to take care of the loss of lives and livelihood due to the pandemic, said Uday Kotak, managing director and chief executive officer of Kotak Mahindra Bank and president of the Confederation of Indian Industry.
In conversation with Editor-in-Chief Shekhar Gupta during ThePrint’s Off the Cuff Wednesday evening, Kotak said the government could also explore the route of direct cash transfers if needed.
“Protecting lives and livelihoods needs to be a priority. For that, if the government needs to spend, even go for direct cash transfers, it should do it,” said Kotak, adding that cash transfers could also be demand-boosting, but there is an increasing propensity among households to save.
“Recession begins in the minds of people and we need to change minds of people to spur demand,” Kotak said.
He also stressed the need to spur private investment to revive economic growth.
“India has disproportionately depended on government expenditure for economic growth. Time has come to spur private investment. There is a need to rekindle the animal spirit of Indian entrepreneurs,” Kotak said.
The Indian economy grew at 4.2 per cent in 2019-20, but it is expected to contract between 5-12 per cent in 2020-21 as a two-month lockdown to combat the pandemic brought economic activity to a complete halt in the months of April and May.
Kotak added that India needs to focus on medium-term growth rather than short-term steroids and said returning to the high-growth path is a non-negotiable priority.
He also stressed the need to have regional subsidies and bring back additional investment allowance that were offered earlier to businesses. A single-window clearance for investors and an assurance of being spared from future unnecessary investigations is also important to encourage investments, he added.
Business should be protected against ‘unfair competition’
Kotak said he interprets Prime Minister Narendra Modi’s ‘Atma Nirbhar Bharat’ pitch to mean that Indian businesses should be competitive and engaged with the world rather than inward looking protectionism. At the same time, it is important to protect Indian firms from manipulative competition, he added.
“China has had a policy of predatory pricing. We must protect Indian business, not against free trade, but against unfair, subsidised and manipulative competition,” said Kotak.
The government’s Rs 21-lakh-crore economic package announced last month had declared some steps to make India self-reliant and reduce dependence on imports.
Subsequently, after the clash between Indian and Chinese troops at Galwan Valley in Ladakh, the clamour for boycotting Chinese products has increased.
The government has also raised import duties on a few items imported from China over the last few days.
‘Unthinkable’ to not pay interest to depositors
Kotak was also critical of the demands from some sections to waive interest on loans that are under moratorium. The matter is in the Supreme Court at present.
He questioned how banks will pay depositors’ interest if they do not get interest on the loans.
“It is unthinkable for me as a banker… that depositors are not paid interest on their deposits,” he said.
The Reserve Bank of India had announced a three-month loan moratorium for all term loans wherein borrowers could defer payments of their principal and interest amount until 31 May. However, interest would continue to accrue during the period, banks had said. This moratorium was subsequently extended until 31 August.
“We need to have a sensible fundamental basis of running the financial system,” Kotak said.
Loss of revenues will see fiscal deficit increase
Kotak said the fiscal deficit of the Centre and the states put together was 6.5 per cent of the gross domestic product (GDP) in a pre-Covid scenario and this could increase to 11-12 per cent of the GDP on account of a loss of revenue due to Covid, he said.
Kotak added the government is exceptionally open, especially in the post-covid era.
He added Indian capitalism has gone through a cleansing process over the past few years though there may be still a bit of cronyism left.
Disclosure: Uday Kotak is among the distinguished founder-investors of ThePrint. Please click here for details on investors.
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