IDFC Bank non-executive chairman Rajiv Lall set the ball rolling by arguing that, while the tax cuts were welcome, what was required most was policy certainty/predictability and greater accountability of regulatory agencies.
Even after the Budget was presented, finance minister Nirmala Sitharaman has been announcing a series of measures to revive the economy, the most significant of which was probably last month’s corporate tax cuts. Panelists at a discussion at the FE Best Banks Awards function last week pondered over what more was required to jumpstart large investments including how a cash-strapped banking sector and financially stressed corporates would fund the next wave of investments (see page 7 for full discussion).
IDFC Bank non-executive chairman Rajiv Lall set the ball rolling by arguing that, while the tax cuts were welcome, what was required most was policy certainty/predictability and greater accountability of regulatory agencies. Bajaj Finserv MD Sanjiv Bajaj reiterated this, adding that while the FM’s measures would go a long way, the important thing was to ensure that these were not one-offs and that the kind of dialogue process seen in the last two months became a continuous feature.
Edelweiss chairman Rashesh Shah said reducing the cost of capital was the most important need, but that couldn’t happen till such time that policy risk did not come down; apart from events like cancellation of spectrum/coal licences, Shah mentioned the threat of cancellation of renewable energy contracts. Hindustan Construction chairman Ajit Gulabchand stressed the need for government agencies like NHAI paying their dues on time, especially after they had lost in various arbitration courts.
Most participants were of the view that asset monetisation had to be a critical part of the strategy to bring back investments, particularly in the infrastructure sector. Lall argued that the private sector simply didn’t have the ability to take on the kind of risks it was asked to take on in the past, and that the best model was one where the public sector took on construction risks and, once the project was completed, sold this to the private sector.
Once this was done, JSW Steel joint managing director Sesagiri Rao pointed out, there was plenty of global patient money that would be more than happy to invest in order to get regular returns over 30-40 years. This, in a sense, answered the question as to where the funds for large investments would come from. Rao added that while, in the past, promoters tended to hold on to very large amounts of equity, the new model would be one where equity shares were much lower. All panelists seemed to agree that the days of 35-36%-of-GDP investment levels would take a long time to come back.