Improvement in real economy will take 2-3 quarters: Arundhati Bhattacharya

What do you expect from the budget? Will dreams come true?
It is impossible to solve every issue within one year. It is evident from the government's intentions that they will take correct measures. From the budget, we will know the direction that the government is heading to. The government will have to keep fiscal deficit in control. Currently, revenue deficit is equal to 70% of the fiscal deficit. Revenue deficit should be in the range of 4.1%-4.5%. We are expecting capital for banks, insurance, FDI and GST to be announced in the budget. Investor confidence will be regained if policies are clear and consistent.

How has the perception of foreign investors changed towards India post May 16?
There has been a great change in the perception of investors after May 16. Foreign investors have always found potential in India. India desperately needs a sustainable long-term growth.

What are the bitter pills that the government has been talking about?
The government has already given bitter pills before the budget. The railway has announced a hike in passenger fares. Among other bitter pills is LPG subsidy that needs to be reduced. Illicit usage of diesel subsidy must be stopped. SUV owners are taking more diesel subsidy than farmers. If people get to know the advantages of bitter pills, they will co-operate.

By when and in which sectors can we see improvement in the real economy?
It will take 2-3 quarters for improvement in the real economy. It is a positive signal that companies are coming in the market to raise money. It will take sometime for demand cycle to start completely. When companies will expand, there will be demand and then you will be able to see the impact. The growth in the real economy will be seen only after 6-9 months.

Are you seeing improvement in the infra, power, SME and aviation sectors?
Initially, the problems were witnessed in the telecom sector, now there is recovery in the sector. EBITDA of telecom companies is in the positive zone. We are also seeing recovery in textile, power, iron and steel. Depreciation in rupee, improvement in the global markets have helped the textile sector. In the last quarter, we will be able to see improvement in the iron and steel sector. The steel sector will benefit from a recovery in the construction sector. IIP figures have starting showing increase in power output. The number of deals in the power sectors shows growing interest in the sector. All ministries are working towards reviving the power sector. If electricity is provided 24x7, then there would be increase in productivity. The health of electricity distribution companies has improved due to restructuring.

How will the recovery in different sectors help SBI?
Recovery in different sectors will help reduce NPAs. Sectors like infra, iron and steel and textile were under pressure for quite some time, but things are beginning to look up in these sectors which should help the bank to further reduce its NPAs.

What will be SBI's credit growth in the current financial year?
Our target in the beginning of the financial year was 15-16%. In the first quarter it was merely 13%. It looks like credit growth will increase from April next year. There is still time for real economy to start showing growth, but signals are positive. Initially, big customers were only talking about NPAs, now they are talking about expansions and loans for new plant.

Do you think weak monsoon is a concern?
Indeed, weak monsoon will have a negative impact. The government needs to reduce dependence on monsoon. We need large investments for irrigation schemes.

When will customers get less-expensive loans?
At the moment, rates are showing no signs of coming down. Deposit rates are dependent on interest rates than the repo rate. Deposit rates will not be reduced till inflation does not come down. Deposit rates cannot be lower than inflation. Until deposit rates don't come down, it will be difficult to offer cheaper loans.

Are you seeing any signs of decline in inflation?
Inflation rate may not rise, but it will take time to come down. Immediately, inflation will not come down and decline gradually. It is possible to bring inflation at 8% as timelined by RBI.