Jan 23, 2014 10:22 AM IST | Source: CNBC-TV18

Fisc not a worry; India on its way to recovery: Uday Kotak

With reforms like regular diesel price hike, fiscal deficit was not much of a worry, says Uday Kotak, Vice Chairman and MD, Kotak Mahindra Bank.

Uday Kotak, Vice Chairman and MD, Kotak Mahindra Bank believes that in tune with the global economy, Indian economy is also on the path to a recovery. Talking to CNBC-TV18's Menaka Doshi, Kotak said that with reforms like regular diesel price hike, fiscal deficit was not much of a worry.

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Meanwhile, according to Menaka, the few business leaders that she interacted with on Tuesday have not sounded very positive on India. They are hopeful but not positive as yet. We have an interesting situation with the Indian delegation that is visiting here, she said. It is fairly top heavy when it comes to the government delegation. So, we have five or six cabinet ministers attending this year’s WEF annual meeting which is surprising for a government that is just about to go to elections.

On the business front, she said there are several familiar faces in Davos that are missing. We don’t have Anand Mahindra, YC Deveshwar and Mukesh Ambani. Sajjan Jindal too dropped out but we do have one Davos veteran  Uday Kotak who has been at Davos for many years.

Below is the edited transcript of Uday Kotak's interview with CNBC-TV18's Menaka Doshi

Q: What do you make of the mood that you are picking up in Davos? Is it a mood that expects a global recovery this year or is it more subdued?

A: This year you don’t have any major global issue; nothing which is shattering. There is no European crisis, there is no global financial crisis, there is no Iraq and there is no Afghanistan. It almost seems like a Davos without any major global issue at this point of time. If at all one gets a sense that global economy is in a sense of repair and improvement. Europe, people still believe will be slow but looks like nobody is expecting a crisis. The US as well no crisis expected, maybe growth a little slower than what people would have liked but no major issues on the global agenda as it looks today. However, having been at Davos for many years I have found that when Davos looks very clam you have to be careful because there is always some storm coming some point of time.

Q: When you say storm is it a good storm or a bad storm, a bad storm that could take us further lower or a good storm that might turn things but help us move upwards?

A: Only time will tell, so, when we meet here in 2015 we should reflect on a calm, looks like no major issues Davos. T he interesting aspect about this years Davos is you are getting the Iranian premiere and the worlds watching how that shapes out and what it does to global oil.

Q: We were talking to the chief economist at IEA earlier today and he said that this could unlikely have any impact in the near term on crude oil prices. So, atleast for the stretch of 2014 he has ruled out any peace agreement with Iran or any easing of nuclear sanctions having a big impact on the oil market because he thinks this will take a long time. What is your view on that?

A: I am more optimistic. My view is Brent which is relevant for India will be an average of sub USD 105 for 2014 calendar. May be closer to USD 100 and that could be good news for India.


Q: What is the basis of that assessment?

A: One is expectation on Iran.

Q: So the geopolitical premium will go off?

A: That is correct. At the same time you are seeing steady increase in the prospect of shale from the US. You are not seeing at this stage any major war or civil strife situation. The only place one has to keep a watch on is Saudi Arabia and Syria but nothing which seems to really affect the global oil situation at this stage and a relatively slower growth in both China and India. If you look the situation globally I feel oil is more likely to be in a USD 100-105 mark. Even if it is USD 5-10 percent lower than last year it is significant from an Indian point of view.

Q: Is India back on the agenda here in Davos?

A: I don’t think India is seriously on the radar the way we have seen India in the years of 2006 and 2007 and even in 2009 when there was a global financial crisis. However I don’t think that is a bad thing because why do we want to be in the limelight when we don’t at this stage deserve to be? Let us get our act together, let us see our growth go up, let's get significant improvement in moving to a 6-7 percent gross domestic product (GDP). We have made some correction through the last year in current account, fiscal is looking better but there is a lot of work to be done. We are work in progress.

Q: Is the fisc really looking better? You are a numbers man, you look at the numbers very carefully.

A: It is looking better for this year.

Q: They are doing a lot of things for instance pushing out some of the subsidy payments. On the disinvestment front all of it has been heaped into this last quarter of the fiscal. The extraction of special dividends from PSUs – is the fisc really looking better on a sustainable basis – the quality of fiscal improvement?

A: The good news also is that there is a diesel price hike happening every month. If oil is under control with a hike every month you are really bridging the gap from both sides.

Q: So, that one big subsidy is being taken care of?

A: Exactly and that is a very large part of the fiscal situation.

Q: You are happy with the quality of the improvement in the fisc over the last quarter or so?

A: There is a lot more which can be done. We got to be careful about things like how food security and everything else will affect next year's budget. However if we get a mature approach to fiscal planning next year I don’t think we need to be excessively worried about the fisc.

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