What were your suggestions at the pre-budget meeting with the finance minister?
The first suggestion was to re-look at sticking to the budget deficit. Let it expand for a year or two, then come back on to the trajectory to reduce it. Right now spend the money on infrastructure and other areas to spur demand. We talked about the cost of equity, make it attractive for people to invest in equity. You cannot build the country on debt alone. People have to invest, including in the markets. We also talked about instalments of PM Kisan Scheme or other schemes to be pushed faster. How to help NBFC liquidity issues; maybe (have a) refinancing agency on the same lines as Mudra.
What else did you talk about?
One of the biggest issues is sudden changes in policy. We need confidence that policies will remain the same for a long time. Let a policy state what is desired, and let the markets decide on how to implement it.
Do you feel there have been too many flip-flops in policy in the recent past?
There have been some in the auto industry. I do not know about the others. Not flip-flops, but sudden changes. And they are talking of making some more. Auto industry, for example, has long gestation cycles. You cannot make a policy change in less time than the gestation period!
What do you think is the way forward for NBFCs?
With the amount of NPAs and haircuts going on, there has been a lot of tightening of norms. Perhaps the government has gone over-stringent. Perhaps looking at them on a case-to-case basis to work them out pragmatically. Maybe even the banks financing the NBFCs.
There seems to be a connection between the state of NBFCs and the dip in consumption in rural areas.
I've always said that if the farmers do not do well, industry will not do well. In fact, my plea for many years has been, make the farmers rich. The rest will happen by itself.
The government has made many announcements to boost the economy. How many of those have been effective?
Some things will take time. The corporate tax reduction puts us at par with our competing countries. There were projects where India was totally out of the race, where people were looking at (investing in) other parts of Asia. Now they are looking at India. I think we will start seeing results in a year or two. We will get over this (slowdown). Some of these are structural and some are cyclical. Every business has to look at its own situation and figure out the structural changes it has to make so as to get more competitive.
There is overcapacity in many sectors. So until those capacities start getting filled up, you are not likely to see great many investments in these areas. It is important that the economy grows faster, important that demand improves, important that money supply to the consumer improves and confidence of the consumer also improves.
What is your wishlist for the budget?
Our basic budget wishlist is that they increase spending. Second, re-look at the taxation on equity. Everything else stems from these two. Our suggestion to the government is to look for knots in the economy and untie them. Whatever is blocking progress, get rid of it. Improve ease of doing business as well as cost of doing business.