Mumbai: With the process of forming the new Congress party-led United Progressive Alliance government under way, Uday Kotak, vice-chairman and managing director, Kotak Mahindra Bank Ltd, said in an interview that the election results are not only a game-changer for the markets but also an opportunity to change world history. Edited excerpts:
Opportunity ahead: Kotak says structural changes in foundations of civil society are needed. Amit Bhargava / Bloomberg
Who would have thought a month ago that we would be sitting here today not despairing over political uncertainty but actually rejoicing the fact that we will have a stable government for the next five years?
I think this is a game-changer, and at some level, an opportunity to change world history.
Do you think it can be that big?
I think so, because the world itself is in so much turmoil. India is considered to be a country which has a significantly higher domestic demand and the ability to build a domestic economy. What India always faced as a challenge was an unstable polity, especially for the last 20 years. Here we have it, and in a very significant manner, with a team which can make India happen.
In about March this year, you had estimated about 5-5.5% GDP growth rate for FY10. Would you like to revise that?
We have to be careful about the short run, because it is too early to start making significant differences. But I think the trend line has dramatically changed. What we have got to see is that this may be a harbinger not only for five years of stability but even a longer-term stability; and that, in our democratic system, is very significant, to be able to make that change in economic policy when we need it.
Let’s assume longer-term policy issues, such as foreign direct investment in retail or the issue of foreign institutional investments and participatory notes, are resolved over two-three years, what would you realistically look forward to in this budget?
My view is that we need some structural changes in the country’s framework. I am a believer that this is a great opportunity over the next five years to change some of the foundations of civil society, whether it is the judiciary, the police, the educational institutions, tax reforms, administrative reforms. Therefore, let’s go to making some grassroots changes of civil institutions in India, which enables us to build a civil society, sustainable not just for the next five years, but maybe next 50-100 years. That is the opportunity.
But if the next litmus test of this government is going to be the budget, what would you like to see in that?
For me, this budget has to be a statement of action and a statement of intent. I will look at both these parts carefully. If it is only statement of intent and no statement of action, it’s a disappointment. And if it’s only statement of short-term action without a vision for what they want to do over the next three-five years, I will be disappointed. I want to see both together.
You have mentioned some of the longer-term changes you would like to see structurally in this economy. What is it that you would like addressed in the shorter term? Do you believe there is need for another fiscal stimulus?
I think there is a need for a fiscal stimulus and it has to be measured, but along with a stimulus there also has to be a game plan that as the deficit goes up, how we are going to address it. It is not one without the other. Therefore, if we are going to correct, in terms of putting more money in hands of people effectively in the short run, what is the game plan that we don’t get out of control in terms of fiscal deficit. We need both of them together in the same document.