The prime minister Narendra Modi had said that the government would have to take bitter pills initially, to ensure good times later for a longer period?
I would say that instead of going for bitter pills, there are a lot of low-hanging fruits that the government should focus on first. Most important there are a lot of projects that are stuck because of approvals, environment issues. The government should start these projects. Secondly, we need to regain investor confidence and for that we need to tell them concretely that our policy, laws regulations will not change retrospectively. GST is another low-hanging fruit. Such things will boost the economy.
What kind of steps can the government take?
Important challenges are to control fiscal deficit. We need to see the impact of oil prices on the fiscal deficit. Second bigger issue is inflation. On that front, we need to see how can we increase supply. To handle fiscal consolidation and inflation, the government needs to look at much bigger structural steps.
So what is on your budget wishlist?
The first priority is to de-bottleneck the existing projects. Other point is to restore confidence and clarity of our rules, regulations and policies, and third is to look at tax-related changes like GST to bring in more efficiency.
Given the monsoon scenario so far, do you think inflation will be further pushed upwards?
It is a little too early to say that the monsoon impact will be as bad as what has been feared. Next 7-10 days will be very crucial but even during that period, we need to handle the existing buffer stocks, and production efficiently. We need to try and reduce wastages. More or less we will be able to control inflation this way.
The government had said that they would be focusing on reviving the manufacturing sector. According to you, what should be the priorities for the government to kickstart manufacturing?
We will have to take several steps to revive the sector. We will have to identify some of the industries. Can we identify electronic industry and food processing industry? Secondly, we will have to improve the overall ecosystem. The third and the most important one is that we will have to de-bottleneck all the stalled projects. A lot of corporate cash flow is stuck due to stuck projects. Till the cash flow gets free, no corporate will think of increasing capacity.
Do you see inflation coming down to a level where RBI can think of tinkering with interest rates?
Interest rates will now remain stable as it is difficult to bring down inflation immediately. If supply chain is improved on the agricultural side, then inflation will come down immediately. I think for a couple of quarters, interest rates will remain where they are.
Do you think by end of this fiscal the GDP figures will be at a comfortable level?
By the year-end, we should easily be able to settle at around 5.5% if not more, so that the next year's growth can be even higher.
What is your view on the banking system?
Given the overall economic scenario, the growth of banks have not been bad. The growth is coming from the overall retail sector currently. Our retail business is growing at almost 24% and the quality of secured retail auto loans has remained quite stable. Corporate have become cash-strapped due to which NPAs have gone up. If right steps are being taken to release cash flow of projects, restructuring and NPA (non-performing assets) issue will be behind us. My expectation for 2014-15 is the additions of NPAs and restructured assets will be less than the previous year.
How is the overall credit growth and do you see revival in the credit demand?
Yes, gradually revival will happen. Retail growth will continue to remain robust. The next improvement will come from the working capital demand for the corporate sector. The third growth will be for new projects which I don't think will come immediately. It will come after a lag of 2-3 quarters. For banking sector as a whole, 15-16% growth is possible this year. ICICI Bank is looking at a growth of between 18-20% in domestic business depending on how the economy picks up.
Any plans of making auto or home loans more attractive?
Current pricing is quite attractive. Overall, we will continue to remain focussed on our cost of funds which is more directly under our control.