With Narendra Modi-led NDA government firm in place at the Centre, the country is now moving from a period of expectations to a period of execution. That's the analysis of veteran economy watcher Uday Kotak, vice chairman and managing director of Kotak Mahindra Bank .
"Mr Modi comes with a perspective and an expectation that he is a 'do-er' and a pretty decisive leader," he told CNBC-TV18's Latha Venkatesh in an interview.
The four-time Gujarat chief minister, the first to lead a non-Congress party to a majority in the Lok Sabha since independence, won the elections on the agenda of development and growth, says Kotak. "We have to move as a society based on entitlement to a society based on opportunity. And it is this expectation that the society will in a way transition from entitlement to opportunity is the biggest expectation and aspiration from this government over the next five years," he said.
Kotak believes Modi can improve the existing sentiment if there are some quick decisions taken on the taxation front. He also feels the government needs to take a look at environment issues stalling development projects. Third quick fix can be provided around the area of fuel subsidies, says Kotak. "Subsidies, which are not creating productivity, can be looked at to make sure that even if you're taking care of the poor, it is for productive use," he said.
Kotak says divestment is the low hanging fruit for the government; share sale from SUUTI's holding and of HZL and Balco can help bridge the fiscal deficit. He says people are willing to give the Modi government time to fix the economy. So a 4.3 percent fiscal deficit number, instead of 4.1 percent, will not be seen as the end of the world as long as the government is on the right path.
Commenting on the RBI's directive to cut down promoter holding to 40 percent by September from existing 43.58 percent, Kotak said the bank may look M&A or secondary market share sale as it has the highest capital adequacy in Indian banking with tier I at 18 percent. "We are very comfortable with the timeline and there is absolutely no issue from our side," he said.
Below is verbatim transcript of his interview with CNBC-TV18's Latha Venkatesh
Q: Is it really that momentous, we had 400 seats majorities even in 1984, under Rajiv Gandhi and many times before that, is stability really that much of a giver of growth?
A: I think first of all this is happening after a long time 30 years. Two, this is the first time a congress government has a clear majority. Three, the person himself Narendra Modi comes with a perspective and expectation that he is a do-er and a pretty decisive leader. So, there is an air of expectation and I do believe that we are now moving from a period of expectation to what is a more crucial phase, which I call expectation to execution.
So, the execution phase is what we are now into post the swearing in and this is therefore a very critical phase of the whole journey.
Q: I agree that it is a first non-congress government with such a massive majority and also you know India being a poor country always had this feeling that you have a left-of-centre government. For the first time Indian population, the Indian citizenry without any apology is electing what is a perceived right-of-centre government? That does makes for perhaps a political difference but do you think this government will be all that right of centre. Look at the memory they come with NDA could not win the next election with the India signing campaign. Are we going to really get all that practical, unideological a government?
A: The elections have been won on the agenda for development and growth. Going back to the fundamental point that you made; we have to move as a society based on entitlement to a society based on opportunity. It is this expectation that the society will in a way transition from entitlement to opportunity is what is biggest expectation and aspiration from this government over the next five years.
Q: I will come back to this right-of-centre, left-of-centre theme because whether it is subsidies or ownerships of PSU banks a theme that I want your views. Not having the courage to be right of centre is really going to harm us. First how many tangles what are the low hanging fruits at all can he remove the land acquisition act, from the statues books. Niyamgiri land is being contested by one industrial house can anything be done about that? What can you do fast?
A: You have some pretty quick wins possible, first is in the areas of taxation. The biggest one of course is Vodafone. If we can find some solution to the Vodafone case like settlement or moving away from retrospective taxation, doing something budget in the entire area of taxation that will everybody one big expectation of savers, investors and international investors.
The second big one is environment and India is in a situation where we are in a developing situation. We have to make a choice between living without power for next 10 years, so that we may have a better future 50 years later that does not make sense - we have to fix things, which are needed for development and make the right balance between environment and development. The flexibility on environment is going to be something which is the key.
Q: Will he have the leeway for flexibility. The courts are in, Lokayukta's are in that space?
A: As long as you have pretty logical basis of deciding in the environment ministry, it will stand. In many ways, the judiciary took the space which the executive left open. If executive takes its space, then the judiciary will take the space that is for judiciary.
Q For taxation environment is there anything else?
A: The third is the whole area of energy and subsidies around that. Diesel for example, he can move faster so that is the absolute subsidy bill of the government comes down. So, the entire area of energy, particularly subsidies is something he can look at with reference to energy.
The fourth is subsidies which are not creating productivity can be looked at to make sure that even if you are taking care of the poor, it is for productive use.
Q: The subsidy bill in the last budget and in the vote-on-account actually did not have too much of fuel. Fuel subsidies are really being born by the oil marketing companies even without that this will be the first full year of the food security bill as well and BJP supported it in the Lok Sabha that is Rs 130000 crore, fertiliser is there is an El-Nino then you don't allow fertiliser price hikes in the year like that.
A: We will have a lot of revenue possible from public sector undertakings (PSU) enterprises. You have disinvestment possibility, you have SUUTI, you have Hindustan Zinc , and you have Bharat Aluminium Company Ltd (BALCO).
Q: But Modi in Gujarat has not been king of divestment
A: Point is that there are some them which are not about going out and necessarily rushing into strategic sales but there are some pending matters like SUUTI, like Hindustan Zinc, so some of those may be easy.
Q: SUUTI is an easy guess who is resisting it but will he be able to overcome the resistance
A: SUUTI view also got Axis Bank and L&T as well.
Q: We have got Axis Bank done half way. There is ITC and L&T left.
A: So the government has to take a call particularly with reference to L&T and Axis Bank which there are no strategic issues around that.
Q: So you expect to hear that much in budget itself?
A: I would say significant revenue raising will happen from government being a significant owner of many assets. So, I see that as a big plus and then combining that with doing things on subsidies - there is enough room for the government.
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