Sunil Jain: Good evening ladies and gentlemen.We have with us today a distinguished panel and what we’d like to hear from our panelists is whether we can we get an economic recovery and how we can get banks to support it. As we know, capital formation, or the investment levels in the economy, which were at 36% or so about three-four years ago, are down to 29-30% now. Projects have to come to a complete halt and data suggests that fresh project starts are down from R24 lakh crore in FY09 to R4 lakh crore. To begin with, I would like to ask Mr Puri, whether he thinks interest rates are high.
Aditya Puri:I think there is a disproportionate focus on interest rates; interest rates are not the reason for investments having slowed down. If there is a slowdown, it is because of the sentiment and that is linked to banks' lending because banks need to get their money back. There are issues on environmental clearances, there are issues on coal. The sentiment is changing, but you can't expect it to be a tap that you switch on and which will see people rushing to fund projects.
SJ: How many years do you think it will take to get back to 34-35% investment levels?
AP: The fiscal deficit is too high as is the current account deficit and you have subsidies and uncertainties in terms of execution. With all these problems we have about 5.3-5.4% GDP growth. I think with action we will be able to do 6% and if we are actually able to implement what we are talking about, then our normal growth rate, without going into what Dr (YV) Reddy earlier said about the inflation corridor, is somewhere between 7.5% and 8.5%. If you get the delta on investments, whether it is public sector surplus that is invested, whether you get the raw materials from the government, that delta will give you the 7%-plus growth rate, which will come within a year.
Ira Duggal: One can't deny that banks have stopped lending, though they are probably justified in keeping it that way.
AP: I don't think there is any issue with credit flow. If you have a viable project today, I don't think we have a problem with finance. But if you don't have a project where I can see viability and visibility and return