Global interest in India opportunity will propel economic growth: Sanjay Nayar

Veteran banker and investor Sanjay Nayar

India must streamline regulatory processes, address infrastructure bottlenecks, and enhance the overall business environment to attract more foreign investment and stimulate economic growth, veteran banker and investor Sanjay Nayar said.

In an exclusive interview with Moneycontrol's Deborshi Chaki and Swaraj Singh Dhanjal, Nayar, who took over as president of ASSOCHAM this month, delved into the nuances of the current investing climate and the pivotal factors shaping India's economic growth narrative.

With a wealth of experience garnered from his illustrious career in banking and private equity, Nayar offers invaluable insights into the dynamics at play in the Indian business landscape. From navigating the intricacies of global finance to fostering entrepreneurship and innovation, Nayar's perspectives shed light on the challenges and opportunities that define India's economic trajectory. Edited excerpts:

As president of ASSOCHAM, India's oldest industry body, what would be your top priorities?

As the new president of ASSOCHAM, I'm deeply honoured and excited to take on this role. My top priorities revolve around fostering collaboration between the government and industry to help realise the vision of a developed nation. I shall also focus on further facilitating the small and medium-sized enterprises (SMEs) in their growth by identifying specific measures that will strengthen the ease of doing business for them.

Given my experience in the financial and capital markets, I want to help explore innovative ways of financing and help create an environment that can crowd in private savings as overseas savings are flowing in.

These priorities align with ASSOCHAM's mission to promote economic development, innovation, and competitiveness across various industries.

You have been one of the most prominent names in the banking sector for a very long time. You led Citibank. How has your post-Citibank career and then, of course, KKR, your work there, influenced you?

My experiences at Citibank and KKR have been incredibly formative and influential in shaping my approach to business and leadership. During my tenure at Citibank, I gained invaluable insights into global capital markets, risk management, and corporate governance. Leading Citibank's operations in India and South Asia provided me with a deep understanding of the local business landscape and the unique challenges and opportunities it presents.

Transitioning to KKR was a natural progression for me as it allowed me to further explore the intersection of finance, entrepreneurship, and value creation. Working closely with entrepreneurs and business leaders at KKR taught me the importance of strategic vision, operational excellence, and collaboration in driving business success.

These experiences have equipped me with the skills and perspectives necessary to navigate complex business environments and identify opportunities for growth and innovation. Today, I am well placed to spend time in facilitating the industry-government vision of India’s growth, leveraging my four decades of experience.

You've seen businesses from various angles, from banking to private equity investments. What differences do you notice in how businesses were built then compared to now, considering the current investment environment and government policies?

The business landscape has evolved significantly over the years, driven by technological advancements, globalisation, and changes in regulatory policies. When I started my career in banking, businesses were typically built on traditional models, with a focus on physical assets and brick-and-mortar operations. The banking sector played a central role in financing these businesses and facilitating their growth.

However, in recent years, we've witnessed a shift towards a more dynamic and technology-driven business environment. With the rise of the digital economy, businesses are increasingly leveraging technology to innovate, disrupt traditional industries and create new market opportunities. This has led to the emergence of new business models such as e-commerce, fintech, and digital services, which are reshaping the competitive landscape. At the same time, technology has opened up new markets, allowing businesses, especially MSMEs, to operate across borders with relative ease.

Moreover, changes in government policies and regulations have also influenced the way businesses are built and operated. Initiatives such as 'Make in India' and reforms in FDI regulations have created new opportunities for businesses to expand and grow. Though challenges remain, particularly in areas such as access to finance, cost of logistics, and regulatory compliance, the focus of the government to strengthen the domestic ecosystem that offers policy stability bodes well for the future of the economy.

Overall, successful businesses today are those that embrace innovation, adapt to change, and leverage technology to create value in an increasingly competitive and interconnected global economy.

Net FDI flows saw a dip in 2023 if you remove FPI and private equity investments from the equation. What can be done to address it?

It is not appropriate to measure FDI flows on a quarter-to-quarter basis. The trend has witnessed a bit of a slowdown in 2023, which can be attributed to various factors, both global and domestic. Globally, economic uncertainty, geopolitical tensions, and changes in trade policies have dampened investor sentiment and led to a cautious approach towards cross-border investments.

Also Read: Why India’s FDI inflow is slowing down, and measures to deal with it

India today boasts of a facilitative ecosystem, thanks to the efforts of the Indian government towards making the country a preferred destination for FDIs. The significant strides made in improving the ease of doing business will be further strengthened in the coming times.

The world recognises the India opportunity and I’m confident that streamlining regulatory processes, addressing infrastructure bottlenecks, and enhancing the overall business environment will attract more foreign investment and stimulate economic growth.

Is it fair to say that investments in the manufacturing sector would be most beneficial?

Yes, investments in the manufacturing sector hold tremendous potential for driving economic growth, creating jobs, and enhancing India's competitiveness on the global stage. The manufacturing sector has traditionally been a key driver of economic development and industrialisation in India. The India growth story will also be based on infrastructure projects that directly support the competitiveness of the manufacturing segment.

With initiatives such as 'Make in India' and the PLI (productivity-linked incentive) scheme, there are significant opportunities for investors to capitalise on India's strengths in areas such as automotive, electronics, pharmaceuticals, and textiles. Additionally, investments in the manufacturing sector can contribute to India's goal of achieving self-reliance and reducing dependence on imports.

What challenges do you see in the current export scenario and how can they be addressed?

During April 2023-February 2024, merchandise exports witnessed a marginal decline, largely due to muted global sentiment. Some of the challenges in the current export scenario include logistical constraints, currency fluctuations, and regulatory barriers.

Addressing these challenges requires a multi-faceted approach involving both government interventions and industry initiatives. I firmly believe that improving infrastructure connectivity, enhancing logistical efficiency, and reducing trade barriers can help lower the cost of exports and increase competitiveness.

In recent times, we’ve seen the country secure FTAs (free-trade agreements) with various countries and regions and with this momentum continuing, Indian businesses will have various new markets to trade with.

How has the experience been working with startups, considering your background in banking and private equity?

Working with startups has been an incredibly rewarding experience for me. At ASSOCHAM, we recently led the Startup Mahakumbh, which was very well received by all stakeholders. This initiative allowed players to table their issues, get expert advice, and network with the entire value chain of the startup ecosystem.

Also Read: PM Modi hails innovation, entrepreneurial spirit: 10 things he said at Startup Mahakumbh

Startups are at the forefront of innovation and disruption, and they play a crucial role in driving economic growth and job creation. My background in banking and private equity has provided me with valuable insights and expertise that I can leverage to support startups in their growth journey. Whether it's providing access to capital, offering strategic guidance, or facilitating partnerships, I am committed to helping startups succeed and thrive in today's competitive business environment.

Regarding your Climate Tech Fund, what are your goals, and do you see enough investment opportunities in this space?

The goal of our Climate Tech Fund is to support innovative startups and technologies that address climate change and promote sustainability. Climate change is one of the most pressing challenges facing our planet, and we believe that technology and innovation can play a crucial role in mitigating its impact. Our goal is to identify and invest in startups that are developing cutting-edge solutions in areas such as renewable energy, clean transportation, waste management, and climate resilience.

While the climate tech space is still relatively nascent, we see tremendous potential for growth and investment opportunities in this space. By supporting startups and technologies that address climate change, we aim to generate positive environmental impact while also delivering attractive financial returns for our investors.

What strategies are you employing in your startup investments at Sorin?

At Sorin, we focus on identifying promising early-stage companies with innovative business models and strong growth potential (we achieved a final close of Rs 1,350 crore). We take a hands-on approach to investing, working closely with founders to provide strategic guidance, operational support, and access to our network of industry experts and advisors.

Our goal is to help startups accelerate their growth trajectory and achieve long-term success. Additionally, we prioritise investments in sectors and technologies that align with our strategic priorities and investment thesis, such as climate tech, healthcare, fintech, and consumer technology. By leveraging our expertise, resources, and network, we aim to create value for our portfolio companies and deliver attractive returns for our investors.