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Jun 11, 2012, 09.28 AM IST | Source: CNBC-TV18

India story intact, if PM sticks to his guns: Aditya Puri

Optimistic as ever, Aditya Puri, chief executive officer and managing director of HDFC Bank believes, India's structural story is very much intact if the PM manages to sort out the basic infrastructural concerns.

India story intact, if PM sticks to his guns: Aditya Puri

Earlier this week, we saw an unusually aggressive Prime Minister Manmohan Singh telling his ministers they have got to get core infrastructure back on track...no excuses, no question of inter-ministerial turf wars in this...that they have got to get infrastructure back.

Is this the "wow" moment that many optimists about the Indian economy were waiting for and will we see an end to the policy paralysis from here?

Optimistic as ever, Aditya Puri, chief executive officer and managing director of HDFC Bank   believes, India's structural story is very much intact if the PM manages to sort out the basic infrastructural concerns.

"So some of these delays will happen: 1) in a democracy, 2) in a coalition and 3) in politics as such. But as long as we keep moving forward within a defined timeframe, I think we are alright," he said.

Below is an edited transcript of Puri's exclusive interview on CNBC-TV18. Also watch the attached videos. 

Q: So is this the moment that you were waiting for when the rest of us were writing off India. Could this be the one wow moment because we have had the prime minister talking aggressively for the first time in a very long time or do you think that he is too much of a lightweight to push this through?

A: I am not going to start commenting on the prime minister, but let me say, rather than the prime minister, is this the action all of us were waiting for? Absolutely. What has been happening is that people have talked too much about the big ticket reforms, which are not as important as getting the basics fixed.

Q: Power and roads?

A: Exactly. So since he has got involved  -- we have the highest respect for his capabilities and he has worked things through before -- I think the basics would be sorted out. If you sort out the issues on power, you don't have to import iron ore, you sort out some of the issues on food, you sort out the issues on pricing of petrol…I strongly believe that India's structural story is still intact.

Q: But yet we had again, the day after the PM said that, the Pension Fund Regulatory and Development Authority (PFRDA) Bill not coming up before the Cabinet. So would you say that's okay because you have got the presidential election coming, so keep the more controversial things on the backburner and go ahead with things that are within your control?

A: We must understand that politics is far more difficult than running a company, media or anything like that. So what would have caused that? I don't know. But that doesn't worry me at all. I think if the prime minister has said that 'I am going to move these things around' I for one, and given the good start, I think we are almost there. So some of these delays will happen: 1) in a democracy, 2) coalition and 3) in politics as such. But as long as we keep moving forward within a defined timeframe, I think we are alright.

Q: Let's just talk about infrastructure and what the Prime Minister spoke about. You have always maintained that funding is not a problem and that there is no viable project that has stalled for the lack of money. So what action would you like to see especially when it comes to the infrastructure projects now?

A: You can almost define the infrastructure projects. If you see power, it's a combination of -- one feeds into the other -- the pricing of power, which is linked to the pricing of coal. So, if you are going to get coal more expensive you have to pass on power. I for one don't even think that this affects inflation because a large proportion of India's demand is still being met through diesel. So if you sort out the price, you automatically sort out the fuel supply issue. That's one part of it.

You have to sort out issues on land acquisition, if the projects have to come through, if your roads have to come through. You have to reduce the red tape on the ability to be able to step up projects quickly. You have to stop troubling the businessman, with 50 different inspectors and everybody asking for his cake. The things that have to be done are more procedural and policies making it easier, clear, and transparent.

Q: Since we are talking about diesel or a hike in the excise duty on cars, what is preferable?

A: Preferable would be a straight hit on the head and that's an increase in the price. Political issues may result in our  having to go the round about way of trying to get the revenue, reducing diesel consumption through affecting it's use. But the preferable route would be a price hike.

Q: In your interview sometime back, you said, “I believe that even if we do not solve our problems, we can grow at 7.5-8%. However, that will be foolhardy on our part. We have the potential to grow at 10%”. Last quarter, we dropped to 5.3% so did that give you a bit of a jolt because that is clearly below potential?

A: When I said even if don’t solve all our problems; I meant there was so much emphasis on retail FDI, now is that really important? Is Wal-Mart going to come and change your supply chain for agriculture? There is emphasis on 26% to 49% of insurance, is that really that important? There is an issue on what is going to happen on banking. When I said even if we don’t solve all our problems, my presumption was that we would solve subsidy and fiscal deficit and make sure that we also brought in some amount of financial inclusion.

What I really meant was that if we go through that, our potential is somewhere in 9% to 10% if we do everything right. But in a democracy you are unlikely to do everything right. If we do half right, we should be in a 7.5-8%, if we go below that then we are where we are. So I presume we are coming to the half now.

Q: So this 5.3% really is a resultant of the twin deficit, which arise out of our diffidence in tackling the subsidy issue?

A: And also the composition of the deficit. If see what the RBI has been saying, a large portion of the deficit is for unproductive uses. Our efficiency of capital has come down from every four units you use to get output now it is five so because a lot of this is not productive. That is one part of it and we also add some saving, which has resulted in a reduction in investment. If we get investment going that is the delta that is required.

HDFC Bank stock price

On October 01, 2014, HDFC Bank closed at Rs 868.15, down Rs 2.85, or 0.33 percent. The 52-week high of the share was Rs 880.00 and the 52-week low was Rs 610.00.


The company's trailing 12-month (TTM) EPS was at Rs 36.73 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 23.64. The latest book value of the company is Rs 180.10 per share. At current value, the price-to-book value of the company is 4.82.

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