India has moved from a capital deficit to a capital neutral to a capital surplus country, National Bank for Financing Infrastructure and Development (NaBFID) chairperson KV Kamath has said.
In an interview to CNBC-TV 18, the veteran banker said the country’s financial sector grew at a scorching pace over the past 75 years as he shared his thoughts on India’s growth story and the new economy.
India celebrates its 75th Independence Day on August 15.
Kamath expects the new economy to be the “architecture of the future”.
From a capital deficit country, India is at a stage where “cash flows are sufficient to propel growth”, Kamath said, adding that the overall economy was “like running an engine with its own momentum”. “Various players have been intermediaries” in making the shift possible.
“The momentum in economy is driven by its components which are underlying businesses. Likewise in terms of capital, companies through their free cash flow generation have got reserves or net worth which allows them to grow further,” Kamath said.
The private equity (PE) sector is an “engine driving new businesses, newer types of businesses” and would provide “huge momentum for the Indian economy going forward”, he said.
Indian entrepreneurs, more than anywhere in the world, are creating value at the lowest cost but people would have to set the right valuation expectation for startups. “I think it will come to an equilibrium in six to 12 months,” Kamath said
Financial services, a luxury limited to some urban areas in the early years of Independence, were now much more widespread, with 80 percent of the population having bank accounts.
The mutual fund industry, too, expanded from a few thousands in the 1990s to 40 lakh at present, while the insurance sector picked up pace in the 2000s, he said in an overview of the financial services sector.
Watch the full interaction here
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