New Delhi: The government should avoid euphoria about India’s growth and success and should lace its policies with pragmatism, given the fact that the global situation is still unclear, ICICI Bank chairman KV Kamath said on Wednesday.
“We probably could avoid at this stage the euphoria about India’s success and growth. The euphoria should be tempered with pragmatism that we will grow but we will need to be cautious too because the global situation is unclear.
“We should be prudent in the way we look at growth,” Kamath told PTI in an interview on the phone from Tokyo, adding that the external sector is still a pressure point and exports have shown negative growth for seven months in a row.
At the same time, he dubbed India as one of the very few success stories with a growth rate of 6.7% during 2008-09, thus demonstrating that it was least scathed by the global financial crisis and by all reckoning GDP is expected to grow 8.5-9% during the current fiscal.
The polity and the government should demonstrate the confidence in the economy as even exports are likely to come out of the red by the next quarter, he said.
“What I’m saying is that the actual growth for the current year will be 8.5%... We have hit the road for 8.5% and above growth and some support from the government would help further on this front,” he said.
”If we aspire and strive, that growth is achievable,” Kamath said, proposing three ways to the government to achieve this growth rate - keep the rural economy as a growth driver; push infrastructure growth and calm the market fears on the rising deficit by tapping new revenue streams such as spectrum sale; and divestment for funding government spending.
“Three things that we need to do just now is - one, to make sure that the rural economy continues to be the growth driver for the next year. Second, to immediately push those areas of infrastructure building, starting with roads, (which) would spur the growth immediately.
“Third thing that they (government) could possibly do is work to calm the market fear, particularly on the government deficit,” Kamath said.
Elaborating the steps that could be taken to calm the market fear, Kamath said that it could be achieved by “articulating how the gap will be met”.
Noting that the government would clearly have to borrow, Kamath said that “at this point of time, it is putting pressure on the market, but the government can find several other ways to raise funds such as sale of spectrum and other revenue generation streams”.
The government during the current fiscal aims to borrow a massive Rs3,08,647 crore, about 17% more than the last year. Besides, finance minister Pranab Mukherjee has said that the government would continue to rely on market borrowing to spur economic growth and restore the growth momentum witnessed earlier.
Asked if a separate disinvestment ministry was needed, Kamath said that what is needed is that activities on this front keep moving.
Advocating a continuing focus on the rural economy, Kamath said, “I think if I were to use experiences of (the) last six months what drove growth was rural India... We have to look at deep depth in India itself.”
“If the government makes (the) rural economy and infrastructure building its growth drivers, corporate India will take over thereafter,” he added.