New Delhi: Observing that society is at a turning point of history, newly elected president of industry chamber CII, Uday Kotak said this is a time for Indian business to transform and take a positive approach towards investment for building Atmanirbhar Bharat'.
Urging India Inc to take advantage of the opportunity thrown up by COVID-19 crisis, he said, those with lower leverage should not shy away from making fresh and bold investment in the new strategic sectors.
Kotak, who is also managing director of Kotak Mahindra Bank, advised India Inc to tap the capital market and raise a buffer fund for survival during the challenging time.
"With the COVID-19 impact, we will now see a world where there will be significant consolidation... there is likelihood of fewer players in most sectors as we go forward, he told PTI in an interview.
This is a time for India and Indian business to transform and take a positive approach, he said adding that he was extremely enthused by the Prime Minister's positioning on Atmanirbhar Bharat.
Acknowledging that poor corporate governance and excessive leverage haunted Indian industry in the past, he said, it is time to take a fresh view on investment, with cleansing of unhealthy elements in the functioning of the corporate sector almost over now.
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"I do believe that in today's times businesses and companies who have relatively lower fixed operating costs and who have lower leverage are very well positioned to take advantage of the opportunity ahead of us," he said.
He also said there is an opportunity to revive some of the dead assets and look at them with a fresh view and make investment at a time when long-term interest rates are coming down.
In order to achieve Atmanirbhar Bharat or self-reliant India, he said, it is imperative to increase investment in the social sector including healthcare, education, environment and rural infrastructure.
The country needs to increase investment in healthcare from 1.3 per cent of the gross domestic product (GDP) to somewhere between five to 10 per cent of the GDP, he added.
Kotak on upcoming GST Council meeting
Asked if the upcoming GST Council meeting should consider rate cuts to spur growth, he said, each and every item has to be looked carefully and a call will be taken depending on the room available.
The all powerful GST Council meeting headed by Finance Minister Nirmala Sitharaman is scheduled to take place on June 12.
"I think each area has to be looked at specifically, analysis needs to be done and if some tweaking is required, we should consider that certainly," he said.
Kotak on the criticism of the Rs 20.97 lakh crore-economic package
On the criticism of the Rs 20.97 lakh crore-economic package largely addressing supply side and doing little to perk up demand, Kotak said, there will undoubtedly be a requirement for further fiscal support.
"Some of it will have to be on the demand side, but it will have to be very carefully sequenced and calibrated... We need to look at sustaining demand beyond immediate pent up demand, and therefore a sequencing of demand side support by the government has to be there," he said.
Bad bank not a good idea unless key issues are addressed
Setting up of a bad bank to deal with the problem of mounting NPAs is not a good idea and will not yield desired results unless some key aspects like transparency and recovery rate are addressed, Kotak said.
Citing an example of Stressed Assets Stabilization Fund (SASF), set up by erstwhile Industrial Development Bank of India (IDBI), Kotak said it did not work well.
"I think we have tried the bad bank in the past. If you recall when IDBI had challenges in the early 2000s, there was an IDBI SASF, which was created. A part of non-performing assets (NPAs) of IDBI were moved to that SASF," Kotak told PTI in an interview.
"If you're floating an idea of a bad bank at the system level, there are two or three important issues which need to be addressed, said Kotak.
First, what is the transfer price on the basis of which these loans will be sold to the bad bank, because the value of that has to be decided through a fair and transparent mechanism; and second, the governance of the bad bank has to be extremely clear, he said.
Finally, recovery is the key to deciding whether to have a bad bank or not, he said, adding that these are national assets created out of public money. We must have the ability of being able to recover more... If we believe the recovery will improve, then a bad bank makes sense. If not, it does not make sense."
Currently, banks sell their bad loans to asset reconstruction companies (ARC) as per the prudent norms of the Reserve Bank of India.
(PTI Report)
