"The funny money is gone and now we are all coming down to earth"

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: there a rethinking within the mutual fund industry?

I believe the regulator is taking it up very actively. I have learnt that there is a move to make new Fixed Maturity Plans (FMPs) locked in till maturity. And the portfolio that the mutual fund invests out of that FMP should be such that the maturity of the asset should not exceed the maturity of the FMP by more than seven days.

Shekhar Gupta: Does RBI need to take more steps?

I think so. I am really hoping that we continuously remain ahead of the curve and these are not normal times. My view is that make sure that you don’t act after the call goes to 20.

Coomi Kapoor: How long will the current economic crisis last?

I wish I really knew the answer. My view is that the global structural problem is 3-5 years fixed. It is in Europe, US, Japan, it has spread to Korea, South Africa…all over. If we take the right set of initiatives, I would still like to believe that India’s GDP for 2008-09, that is the current year, should average around 7 or close to 7.

Sunny Verma: You mentioned an uneasy calm. Can you elaborate?

I think the financial sector is breathing well. The question in our minds is what is happening in the real sector. The job of the financial sector is to serve the real sector. And if the real sector has issues, it comes back to the financial sector. So what we really want to see is what is happening to the auto demand, commercial vehicles, aviation, real estate, and construction. That is where the action is.

Sunny Verma: The origin of the problem seems to be over-leveraging. Is there a particular level of leveraging you think ideal?

Globally, this excessive leveraging was creating some kind of funny money. So the entire world was seeing this funny money coming into its system and India got its share of funny money. This money was there in our system for the last five years and this started becoming the steroid. We got hooked to exuberance, high stock market, asset values, real estate, spending, and high salaries. And you saw this kind of drug the world got addicted to. Most of us were walking two feet above the ground. Now the funny money is going and gone and we all are coming to earth.