Subsidy reduction will help interest rates come down: Shikha Sharma

The excise duty relief for auto, consumer durable and capital goods sectors has been extended till 2014-end. What is your take?
The interesting thing that is we are not waiting for the budget. If there is an issue today, fix it today itself and you don't need to wait for the Budget. Budget is fundamentally a statement of balancing revenues and expenses and that is what we should hope to see. Policy changes can happen before, during or even after the budget.

A message that was conveyed to common man is that the inflation is going to rise. Don't you think the price hikes in gas and onion, and the recent rail fare hike will create an imbalance?
Ultimately, we all voted for a strong leadership that will be pro-development and pro-growth. Sometimes you may have to swallow bitter pills. Decision of hiking railway fare was a right decision, but could have been done in smaller doses. There was also a partial rollback.
Somewhere I feel people should also be ready to pay for the service quality. We assume that people are not ready to pay but the fact is that people are willing to pay for quality. If you want to remove supply-side constraints and solve inflation problem, then you have to make investments attractive.

Gas price hike, once implemented, will have a wide ranging effect from power plants, CNG and everything. Do you see it as a people-friendly step?
Every step where we have this kind of irrational legacy to solve for is going to create short-term pain. For this, we should have a right long-term framework -- to price appropriately all products. It must be done in phases.

Expectations from this year's budget are too much…
We have to recognise that all things will not be solved at one go. What people are hoping to see is continuity of a pro-growth, pro-development message by taking rational moves in digestible lots and taking away some of the negatives. It is important if there are some signals in the budget that we are creating capacity for infrastructure investment either through divestment -- using those proceeds from the supply-side or through creating a long-term savings market in the country. Maintaining fiscal prudence will be another thing people will hope to see in the budget.

There are a lot of concerns on interest rates. When will it come down?
Higher interest rate impacts inflation, investment attractiveness and therefore, growth. Feeding inflation has been from supply side. To fix the supply-side, you have to reduce subsidies for which you have to increase some prices. This is a move in the right direction, which will help interest rates to come off. The RBI will have to look at fiscal prudence, rains and external factors.

The other concern for banking industry is on the asset quality.
The factors that are causing stress on the books of banks assets are stalled projects, growth and high interest rates, part of payment cycle getting stuck, rupee shock in some specific sectors. In stalled projects we are seeing some progress, growth and interest rates we haven't seen much impact. Our assessment is that the problem has peaked and things should get better from now on. They will get better as economy gets better

For the current financial year and next, what could be the reasonable estimate for growth?
Last year, we closed growth at less than 5%. This year if we are able deliver growth between 5-5.5%, then it is a good progress for a country like ours. Next year, if we get to close to 7%, and going ahead, what we all are aspiring for is 8%.

What sense you are getting from global investors?
There is now faith returning from overseas investors, as they appear confident that we are going to follow a pro-development policy. We are going to take away some of the difficult policies of doing business. We are going to take away some of the uncertainty and therefore India will become more attractive. We will see that sentiment change in to investments.

At Axis Bank how are you positioning yourself to the promising future in the next 3-4 years? Are you also looking at inorganic growth in any of the verticals?
There are a lot of opportunities in a country like ours and when we have so many opportunities, we are playing at segments where we have some strengths. We don't want to get in to all the space that we have in the market. We want to be able to serve our key customer bases. We have acquired Enam franchise which we felt was a gap in our franchise. We are continuing to invest in technology, people. We are very well positioned in our growth prospects.