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Banking on the Indian economy: KV Kamath

Published on Thu, Dec 07, 2006 at 13:53 | Source : Moneycontrol.com

Updated at Thu, Dec 07, 2006 at 15:43

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Broadly regarded us the banker of the country, KV Kamath, MD & CEO of ICICI Bank is the recipient of CNBC-TV18's Outstanding Business Leader of the Year Award.

Not only from a stock market perspective, but also from a broader Indian business and consumer perspective, Kamath discusses how the banking sector is shaping up, with the larger Indian economy in hindsight.

Excerpts from CNBC-TV's exclusive interview with KV Kamath:

Q: What makes you so optimistic - is it the kind of bed-rock of consumption that you are seeing or the external factors like low interest rates, low inflation which are fairly benign, which are supportive to business blooming for the next many years?

A: The bed-rock is really about competitiveness. I think India became competitive about three years back after the bad period. The previous five years in Indian industry went through a lot of pain, which also coincided with the rise for the knowledge revolution.

Really, 60% of our economy, what we call services, is knowledge. So that is now in full bloom. Then you have a competitive Indian industry, so this is really the bedrock. I think the environment in terms of interest rates and the benign situation that you described only lends further momentum to this growth. So this to me appears to be something that will continue for a long time because the bedrock is strong.

Q: There have been some apprehensions like the Central Bank suggesting that in pockets maybe there is overheating and we need to be vary about that. Do you share that concern or do you think it is premature to talk about those concerns now in the light of the growth that we are seeing?

A: We are in an economy, which is growing, and I believe that the economy is really now nudging towards 10%. Clearly, some degree of concern is warranted because I think in a regulatory context and in the monetary policy context, we will have to look for any pockets where the behaviour is not in sync with what is expected. So I think this caution is warranted.

As long as we facilitate growth at this level - because for a country of our size we will need to grow at this pace to get ourselves into a developed status, I think, I am happy with it.

Q: What worries you? If you can just construct scenarios of what could go wrong, I know you are optimistic as most people are but do you worry about things like inflation, interest rates and what could go wrong and curb what looks like seemingly very good growth years ahead of us?

A: As of now if one looks at the interest rate environment, I think everybody is conscious that we need a climate, which is facilitative of growth and interest rates being kept in a range where one can have growth without sacrificing any risk element in terms of inflation. At the same time, inflation has been always flagged as something that we should be on a look out for.

If one looks at the last 4-6 monetary policies that have been enunciated, clearly there has been lot of articulation on inflation and measures required to control it. So in a policy context they are driving it with a full degree of understanding that you need to drive growth, at the same time you need to have instruments within your control, which could then be brought to play, if indeed there is any risk.

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