Bajaj urged the government to continue to focus on enhancing the ease of doing business and reducing associated costs. To push reforms in areas such as land, labour, and power where both Centre and states have jurisdictions, a structure like the Goods and Services Tax Council can play an important role, he said.
Bajaj pointed out that from the second to the third quarter, the private sector’s capacity utilisation had increased from 72% to 74%. “PLI-sectors like electronics, chemicals, construction, have already started attracting new investments,” he said, suggesting a pause in monetary tightening.
Growth Impetus
“We are at a stage where we have multiple levers of growth from the private sector and investment is ready to jump. But they need the right tailwind there and we believe that rate pause will provide that necessary direction,” Bajaj said.
Banking Reforms Needed
Official data published in the evening showed that retail inflation marginally eased to 6.44% in February from 6.52% in January, but was above the central bank’s upper limit of 6%.
Bajaj reasoned retail inflation is expected next year to be around 5.5%, very much in the comfort zone, adding that there may be ups and downs but, in general, trend lines are very clear.The biggest trigger for the Indian economy is for the RBI to delink now from global action, he said. In its February meeting, RBI’s Monetary Policy Committee had raised rates to 6.5% – its highest level in five years.
“It is time for us to decouple on interest rates from the rest of the world. Because this is now the single largest trigger for demand,” he said.
“What we need is now an environment where the private sector is able to see consistent demand growth and you will start seeing more and more sectors going in for investment to meet the demand,” he said in an interview on the sidelines of the CII Partnership Summit.
Sourcing destination
Bajaj said it is India’s time to emerge as the alternative sourcing destination and not only for one or three years, but also for the next decade or two.
Lauding the government’s efforts for its infrastructure and production-linked incentive schemes, Bajaj said there is a need to create an employment-linked incentive scheme, focusing on employment-heavy sectors like logistics, tourism, and filmmaking.
To further his argument, he pointed to India’s two Oscar wins on Monday and the work done by India on VFX and animation in films like Avatar.
India would need many more banks and NBFCs to support growth.
“We need to channelise our savings to productive use,” he pointed out, highlighting that insurance and pension need to be used as long-term funding sources, as is the global norm.
“We have banks doing a lot of the long-term funding, which is a complete mismatch of the assets and liabilities,” Bajaj said, calling for a white paper on how to fund India’s growth for the next 10-20 years. The promoter of Bajaj Finance and Bajaj Finserv, Sanjiv Bajaj said that the central bank needs to have a progressive approach with regard to “ensuring that the right amount of penetration and competition is permitted in the banking sector”.
“Licences to business houses or industrial houses, encouraging first-generation entrepreneurs, professionals from banks to set up their banking entities – these are all the different routes the central bank can take,” Bajaj noted.
The RBI can also observe non-banking financial companies (NBFCs) that have a good track record and monitor them for a decade to open up banking to them, he suggested.
This unlocking of capital, he said, also needs to happen on the green finance side, especially for small and medium-sized companies.
Green compliance
He recommended the creation of “a certification programme with the government on ESG compliance”, which will help infuse confidence in lenders and improve fund availability.
On the issue of the failure of Silicon Valley Bank, Bajaj appreciated the quick action taken by the US authorities to shield the system and pointed to lessons that India can learn to develop its startup ecosystem, especially in relation to funding and taxation.
“Traditional debt and equity and the rules governing these instruments need to evolve for the startup ecosystem,” Bajaj added.
