Faced with headwinds, India will glide over the economic situation that it is in, provided adversities can be turned into opportunities. Though India’s GDP is on the slide, and its twin deficits of current account and fiscal are on the rise, India’s senior political leaders, bankers and corporates feel there is light at the end of the tunnel. This was the sum and substance of the erudite panel that discussed the possibility of “engineering boom in an environment of gloom” at The Sunday Standard Best Bankers’ Awards function in New Delhi on Friday. The panelists were Anand Sharma, Union Minister for Textiles, Commerce & Industry, Rajkumar Dhoot, MP, Piyush Goyal, MP, Snehlata Srivastava, Additional Secretary, Finance Ministry, Venu Srinivasan, CMD of TVS Motor Company, Subir Gokarn, former RBI deputy governor and Director, Research of Brookings India, Arundhuti Bhattacharya, MD and CFO of SBI, Rana Kapoor, Founder, Managing Director & CEO of Yes Bank and P Elango, CEO of Cairn India. Analyst-author Shankkar Aiyar, who moderated the discussion, started out by comparing the economy with a half-filled glass, which could be perceived as either half empty or half full.
Anand Sharma clearly saw it as the latter. He said despite the challenges faced by the country, India has remained and will continue to remain as the most attractive destination for investment. “India is lucrative in terms of foreign direct investment and numbers support that fact. According to data, about $175 billion has been invested by foreign investors over the last five years. So far, this year, we have already got 25 per cent of the expected investment flow,” he said.
On exports, Sharma said exports have done positively in the last three months, notwithstanding tough market conditions. “India’s exports reached the $300-billion mark in 2012-13,” he said and hoped that despite weak markets, the figure would be far higher this year. “We are looking at new geographies like Africa for exports, and that is one of the key reasons why Indian exports are doing well. We have inherent strengths and will overcome the headwinds. The government has initiated a slew of new reforms which will also help the export scenario,” Sharma explained.
Venu Srinivasan admitted that the country and economy were in a crucial phase, but said the challenging market conditions also posed a huge opportunity for all sectors. “Our exports are moving up and industry is exploring new markets. We are optimistic about the growth of the economy,” he said. Agreeing with Srinivasan, banker Rana Kapoor said, “It’s not about gloom and doom. It’s about how you change adversity into an opportunity.”
Asked to name the worst-affected sectors during the present crisis, SBI’s newly-appointed managing director Arundhati Bhattacharya said there were broad difficulties across sectors. “For instance, in infrastructure, several projects are incomplete for a variety of reasons, such as delay in land acquisition, or the high cost of funds. Power projects are no different and some of the projects have been indefinitely stalled either due to lack of resources, high capital costs or delays in getting necessary approvals,” she said adding that even the financial sector was hit and banks were working on the corporate debt restructuring mechanism as prescribed by the RBI. “Non-performing assets vary from project to project and the sector needs to come up with long-term instruments to meet the aspirations of industry. We need to get the money back into the system to keep it operational,” she added.
According to Subir Gokarn, the fiscal stimulus does exist and industry needs to make use of that. “It’s not just about a business recovery cycle but a more serious situation. The short-term measures introduced by regulators from time-to-time to contain the crisis will have meaning and significance only if they are used to supplement long-term structural measures,” he noted.
Stating that external sector vulnerabilities came to the fore in 2012-13, as the CAD widened to a historic peak of 4.8 per cent of GDP on top of an already high level of 4.2 per cent in the previous year, Cairn’s Elango said, “The widening of the CAD was largely caused by excessive oil and gold imports and moderation in export growth. India is heavily dependent on import of crude and by substituting crude oil imports with gas, the nation can look at considerable savings, which in turn can impact the overall macro economy and be one of the key game-changers.” Elango pointed out that India spent `6,72,220 crore last year on importing crude oil. “We need to build infrastructure for transporting gas across the country. This will eventually help reduce our dependence on costly imports,” he said.
Finance ministry representative Snehlata Srivastava agreed that the country was facing an economic crisis, but felt “there is unnecessary pessimism” all around. “With time, this phase too shall pass,” she said. Rajkumar Dhoot agreed, and said the economic situation was not as bad as it was being made out to be.
BJP treasurer Piyush Goyal was of the view that too little was being spent on infrastructure and pumping in more capital into the sector could improve the economic climate and create more jobs.