Veteran Indian banker Uday Kotak outlined a comprehensive plan featuring seven key recommendations to propel India towards achieving a $30 trillion GDP by 2047, coinciding with the nation’s centennial celebration of independence.
Uday Kotak shared suggestions regarding a financial model for India’s dream. He highlighted the transformation of Indian savers into investors over the years, citing crucial reforms that have played a pivotal role in instilling confidence in financial assets.
He said, “In the early 80s, the Indian saver had low confidence in financial assets versus gold and land. Slowly the saver moved some part to bank deposits, UTI and LIC. Even in the 90s, investing in equities was considered “speculative”.
“Hence companies looking for capital went to the foreign institutional investor (FII). FIIs saw potential and bought into companies while the Indian saver stayed away. Companies raised capital through the less known Luxembourg stock exchange. India’s capital market was being exported,” he added.
However, Kotak added that with the evolution of mutual fund platforms, cash equities, derivatives markets, insurance funds, and global private equity, the landscape shifted, converting savers into investors.
Uday Kotak on achieving sustained growth
The veteran banker shared seven strategic recommendations to support India’s growth story:
Avoiding bubbles: Uday Kotak stressed the importance of steering clear of bubbles through effective policy measures, robust regulations, educational initiatives, and ensuring the availability of quality investment opportunities. He highlighted the need for companies to raise equity at a lower cost of capital for productive use.
Tax arbitrage in debt: To promote balanced growth, Kotak said India must avoid tax arbitrage in debt. The expansion of debt markets is deemed essential for creating a more diversified and robust financial ecosystem.
Double taxation on dividends: Kotak called for a reevaluation of double taxation on dividends, highlighting the need for a more favorable tax regime to encourage investment.
Addressing low-cost leverage: The banker cautioned against the potential distortion of financial markets through low-cost leverage via derivatives. This area requires careful attention to maintain market integrity.
Evolution of banking sector: With savers transitioning to investors, Kotak highlighted the challenges faced by the banking sector. He pointed out the need for large corporates to meaningfully shift towards capital markets (debt and equity) instead of relying solely on banks.
This shift positions banks as distributors of corporate debt rather than storage houses, necessitating penetration into mid-sized corporates, MSMEs, and consumers.
Avoiding Retrospective tax and regulatory regime: He emphasized the importance of avoiding a retrospective tax and regulatory regime, providing stability and predictability to businesses.
Focus on acquisition financing and IBC/NCLT process: The veteran banker called for urgent attention in two crucial areas for India’s aspirations—acquisition financing and streamlining the Insolvency and Bankruptcy Code (IBC) and National Company Law Tribunal (NCLT) processes.
FM Nirmala Sitharaman thanks Uday Kotak
Finance Minister Nirmala Sitharaman expressed her gratitude to Uday Kotak for his insights, acknowledging his recognized experience in the financial sector.
Tagging Kotak’s post, Sitharaman said, “Thank you Uday Kotak for sharing your views. Your experience in the financial sector is well recognised.”
source by: India Today News
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