ET Now: Speaking of expectations from Narendra Modi, don’t you think there is a lot of hope and money behind a person? Despite his goodwill, there are structural problems in the economy. Doesn’t even the Prime Minister have a magic wand?
KV Kamath: If you look back 10 years ago, the economy reached almost double-digit growth despite all the structural problems. Now you have a leader who has a known bias to fix things and make sure things work ৷ It’s the same set of structures, the same set of people running it. You have the right leader who can make the effort.
ET Now: The other day we meet Mr. Birla, the finance minister, and as he walked out of the meeting, he said he hoped the economy would recover in three to six months. He says he is now going to start investing in India. We haven’t heard much from corporate leaders. You have a vibe of corporate India mood. When do you think corporate leaders will start investing?
KV Kamath: The first money comes from the market. It is the collective wisdom of the marketplace that there is action and we will move quickly. It improves the confidence level of the industry. Now we need to see if some of the ground conditions that people need to get back into investment mode will change. Today I read that whatever is stuck with a big slate of reforms or projects will be addressed in the next few days. If so, you will see a marine shift in investment sentiment, as it were.
ET Now: It could happen in three months. Do you think so?
KV Kamath: I think it could start to happen in three to six months. But we want increased investment. There is enough to harvest in the first six months in terms of stuck projects.
Take it now: One indication that Corporate India will also be waiting for is Budget 7 Given the mandate we have, the power that this government has in Parliament, would you expect tough reforms in this budget?
KV Kamath: I don’t want to call or guess what someone is doing. But I think it will be a budget where you will try to maintain financial discipline and get the discipline you need. Now in what measure, in what combination, the government has to be called. I think one thing that people will see in the budget is fiscal discipline and ways to control deficits over a three-year period. If it is well constructed and well pronounced, you will see the exhilaration growing.
ET Now: 4.1% Does the number seem a little complicated to you?
KV Kamath: If you remove waste, you eliminate what is stolen and what is not needed, 4.1 is achievable.
ET Now: When do you think revenue and monetary policy will start working together? When do you expect the rate to turn?
KV Kamath: Regarding monetary policy, we always say that let’s look at the constructive design of a revenue deficit. We know what it is and where it will end. Once they see that structure for this year and say, for two years on the line, then I must believe that they should have more confidence to tinker with the rate, or else inflation itself will start to decline. We can see that a number of people have come up with a number of solutions, ranging from releasing food stocks to pushing the APMC reform. I am sure again that this is an issue that the government will understand very quickly and will take all the steps or some steps that will give the policy makers confidence to reduce the interest rate. In this fiscal year, we have to look at the next 12 months. I think it should start happening within the first six months.
ET Now: A quarter of a year or more?
KV Kamath: I have no call in this regard. Let’s see what happens. It will all depend on where the deficit numbers come from and whether you can reduce the rate of inflation. If these become positive then the rates can go up fast.
ET Now: What is your vision for short-term, medium-term and long-term growth?
KV Kamath: My long term number is not a single number. It’s two digits. So you can make a guess at it.
Take it: during the tenure of this government?
KV Kamath: I think this will be the term of the government.
ET Now: First term itself?
KV Kamath: This will be the first term of this government. Definitely. If that is the way they are going, I am reasonably sure that we will see a double digit rate in the first term of this government.