Indian govt needs to focus on structural challenges: Sanger

Finance Minister Arun Jaitley is in United States of America to hard sell the India story – after the Modi government took charge, the mood was upbeat but one year hence they seem to have hit a speed-bump and most market-watchers believe that the government has not fast-enough with reforms and equities too have come off their record highs.Arvind Sanger of Geosphere Capital in an interview to Shereen Bhan live from outside Nasdaq said he would like the FM to make commitments towards handling structural challenges with regards to power shortages and banking. He would also be keen to hear more with respect to subsidy management and investments in infrastructure.Answering a query on way forward for the market, he said the June quarter may not be as bad as the March quarter, which was the worst quarter for corporate India in many years.He is cautiously optimistic on India in the short-term but believe it to be strong from a medium to long-term perspective.He is upbeat on the consumer sector driven by urban consumption, NBFCs and autos to some extent.Talking about the FOMC meet, he said given the Greece uncertainty, the Fed would be relatively cautious but could hint at rate hike in September,, which could result in a slow down in fund flows.

Below is the transcript of Arvind Sanger\\'s interview with CNBC-TV18's Shereen Bhan.Q: The Finance Minister is starting a nine day outreach in the US. Give us a sense of what you make of this and do you believe this is in a sense a message being sent out to try and reassure both strategic investors as well as FIIs?A: It is probably driven by the need to update investors both the strategic, corporates and financial investors about the opportunities that India presents from a long term standpoint.Clearly India has gone through a little bit of a negative tone recently in terms of investor perception and so it will be helpful to hear a reassertion of the governments commitment to welcoming investors and to being much more responsive to whatever issues that might be out there.Q: What specifically would you like to hear from the Finance Minister? On the eve of his arrival the government has now setup two new committees to look at Goods and Services Tax (GST), one headed by the Chief Economic Advisor to look at rates and the other to look at legislation. They have also cleared FDI proposals worth over Rs 6000 crore. If i were to ask you specifically what is it that you would like to hear from him?A: We would like to hear from him some commitment towards what are the major structural challenges that they are going to handle? How quickly is some of the subsidy issue on some of the things - oil has been taken care of by falling global prices. However things like fertiliser, LPG which they have made some steps on, how urgently or how significantly are they tackling that, how is the investment in infrastructure going to be tackled because the government has been somewhat slower than we would have hoped in terms of the infrastructure bottlenecks being debottlenecked, how are they going to create confidence in Indian businessmen because Indian businesses seem to be lacking in confidence and whether that is more specific action on land or labour or other things that make the "Make in India" come true.The one area that i am very puzzled by this government is this government keeps saying that India is a power surplus country. India is not going to be a power surplus country in my lifetime. India has massive power shortages just because power plants are being underutilised. It is a structural problem of SEBs not being able to pay. So, some serious attention to the power sector and some serious attention to the banking sector where the public sector banks are capital starved. So, those are two key underpinnings in addition to all the legislative stuff that we talk about that show the government willing to tackle the tough stuff not the easy stuff.

Q: On both those issues whether it is the restructuring of the discoms or it is dealing with capitalising public sector banks, we are still waiting to hear clarity form the government on what they intend doing. We have had a bunch of meetings that have taken place. Today we have seen Deutsche Bank revise downwards its Sensex forecast. It is not the only one, there have been a bunch of other revisions that we have seen come in. What do you make of where the markets could be headed at least in the short term and by the end of the year?A: It certainly looks like the June quarter should not be as bad as the March quarter but let us be clear here, the March quarter was the worst quarter for corporate India in several years. So, i am not sure what GDP numbers are being smoked out of the statistical office in India but it looked like a double dip in terms of economic performance certainly of corporate India. So, I think June may be slightly better.

However, we need to see signs - there is a cyclical recovery coming. That has taken a lot longer than it should have normally happened, hopefully that is coming but unless we fix some of the fundamental problems on infrastructure, power and particularly the banking sector where PSUs still account for 70 percent of lending, I am not sure that we can start forming any optimistic short-term projections for the economy or the market.