Speaking at an event organised by Bloomberg, Kotak said, "We need to increase our spends (in healthcare) from 1.3 per cent to at least more than double, because we are very under-invested in healthcare" and also increase the efforts on education.
The country will have to find the resources over the medium term for these two areas because it is a necessity for its long-term prospects, he emphasised.
During the conversation with private equity major Carlyle Group's co-founder and co-chairman David Rubenstein, Kotak said this is the best time to invest in India for foreign investors, adding that the best returns were made on the bets taken between 1999 and 2003, when the country was facing challenging economic prospects.
He said digital, e-commerce, pharmaceuticals, technology and consumer goods are the best sectors for investment, though there can be surprises across sectors.
Rubenstein said India and China are the best places to invest over the next 10 years outside of the US. However, he admitted that India has not received adequate investments as compared to China.
"But I do think that in the next 10 years it will change as India is increasingly seen as an attractive place in which to invest capital," he said.
Kotak said the Indian government's response to the pandemic has been more cautious and welcomed the RBI's work.
He explained that the monetary policy has been more accommodative but there is conservatism on the fiscal side because of the rising fiscal deficit which will take the public debt to GDP ratio to 85 per cent.
He said India's combined fiscal deficit, including the gap in both central and state governments' finances, will come in at 13 per cent in FY21.
There are some successes lately on the COVID-19 front but the country will have to be cautious in the upcoming festive season, he said.
Kotak Mahindra Bank has a succession plan like any other institution, Kotak said, adding that his elder son Jay, who has joined the bank, can come up only on merit.
His younger son may settle in the US, where he is studying right now and the elder son may stay back in India, he added.
India needs to re-imagine its financial sector to be more robust and the government will have to take tough decisions on its ownership of the state-run lenders, he said.
Kotak said the market share between the state-run banks and the private sector ones will be evenly split in the next 5-10 years as against 65:35 at present.
"We have to dramatically take advantage of opportunities arising out of tech and digital. Transformation of the financial sector across technology, risk management, cost of intermediation, effectiveness of financial institutions is crucial for our future," he said.
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