Without crisis tough decisions aren't taken: Ashish Chauhan

India's savings as a percentage of gross domestic product (GDP) is estimated to be below 30 percent for FY13. Investors are wary, worried or simply watching. What will it take to change the mood? While the US and the Europe are signaling strength, India is headed towards lower growth and general elections. But, according to BSE MD and CEO Ashish Chauhan, without crisis democracies don’t take tough decisions.

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He says even back in 1991, the first and the most important activity that was done was devaluation. It ended up kicking off the liberalization framework, he adds. But contrary to what happened back then, when India didn’t have even 15 days of money to import, today the scene is much different, Chauhan says. Policymakers today have room to take tough decisions, he says. So going forward, he sees a very positive move in terms of industrial activities, exports so on and so forth. Below is the verbatim transcript of Ashish Chauhan's interview on CNBC-TV18 Q: We are trying to gauge the mood picked up in the first week of September. We had some index of industrial production (IIP) numbers to bolster that sentiment. Would you say that this is indicative of a change in the tide or should we still wait to find out some more?
A: I think its early days, but the signals are good. The Reserve Bank (RBI) governor also has set up in motion various processes. I am sure everyone is aware of the issues. Everyone is also aware of the strength that is being seen in Japan even in China, I have been told there has been a lot of strength in the manufacturing numbers in Europe and in the US. So effectively if the world does well, India would certainly do well.
Secondly, if you recall 1991, the first and the most important activity that was done was devaluation. It ended up kicking off liberalization framework, but for me by having a devaluation of such a large magnitude, what has happened is that suddenly India has become very competitive. We were losing business or services of manufacturing to various other countries like Philippines. I read yesterday that now Philippines has become less competitive on cost vis-à-vis India and so for me, it is a very interesting conundrum that by having this kind of valuation if you become competitive and it allows you to kick off or kick-start the economy, basically you are on the right track and so many actions which are being taken for businesses, for the population in general, the subsidies and controlling of them giving commitments on current account deficits (CAD) and all, for me we are on a very strong wicket, we are on right track.
Times were bad in 1990-91. We didn’t have even 15 days of money to import. Today we are in a significantly strong position. Of course the way I look at it is without crisis democracies don’t take tough decisions and in some sense this was probably an artificially manufactured crisis of sorts. We were expecting a crisis and we ended up creating a self-fulfilling prophecy and that has allowed the policymakers room to take tough decisions which they have taken now and they will continue to take it. So effectively going forward, I see a very positive move in terms of industrial activities, exports so on and so forth. Q: You mentioned of course the announcement of the new governor of the RBI gave a lot of joy to the markets overall and a lot of confidence as well. What are the measures that you think he has at his disposal and the steps that one needs to take to continue or give a little more impetus to the work wheels?
A: The way I look at it is the devil is in detail. If the policies which need to be implemented are thought through very much in terms of implementation, less harassment, ease of execution and so on and so forth, the last few announcements were about streamlining the activities and so on and so forth and they have been taken really well by everyone.
So for me that concept of getting into the details, asking the marketplace, also asking the people who actually operate on such policies about how to make them easy to use and hassle free, that is one large piece. Second large piece is about taking strategic decisions. There are strategic decisions, there are tactical situation and then operational issues. You need to ease the operational part of it.
Even your new policies have to be easy to operate and monitor and comply with, because today compliance is a very large portion of businessmen jobs and large business jobs, but the strategic large issues which now are being taken up and implemented with ease, for me that gives a lot of confidence, but at the same time the world is going to go through a reasonable amount of volatility.