From the sidelines of the World Economic Forum at Davos, Chanda Kochhar, MD & CEO of ICICI Bank , says India is at a point where most of the macroeconomic indicators are positive and it is time to capitalise on all the potential that the country has.
When asked on her view whether the Modi government would deliver on its promises, she was optimistic that Narendra Modi would deliver.
On the interest rate front, she expects further softening, which would be good for the whole economy.
Below is the transcript of Chanda Kochhar's interview with by Susan Li & Geoff Cutmore
Li: We spoke earlier with the State Bank of India chairwoman and she said because of this unleashing, more easing and business stimulus from the ECB - is good for India, your thoughts?
A: Of course it is. The more the liquidity in the market, I think that is good for India but what is of course required for India is to maintain its investment climate so that it continues to remain a great investment destination.
Cutmore: Is Narendra Modi going to deliver? That is the question I keep hearing here, a lot of people are very optimistic about India and there does seem to be a rerating going on here but at some point we are going to have to see some real concrete evidence of reforms?
A: Definitely I think he is going to deliver and I think that direction is correct - everything all the policies that he has articulated are growth friendly, they are business friendly. And also it is not that no action has taken place, a lot of small action has taken place, a lot of opening up of the foreign direct investment (FDI) in various sectors has taken place. So I think a lot of the decisions have already been announced but yes, the impact of all those on the real economy always takes a little bit of time.
Li: So you have two months to go until he finishes off his first year in office but I would say there has been a bit of a flip-flopping from Modi because when he was the head of Bhartiya Janata Party (BJP) and there was another administration in office, he was against introducing goods and services tax (GST) but now he said okay we are going to introduce the GST in India.
A: I think GST is very good for the economy. If it gets implemented, it can add almost one percent to the GDP. GST rationalises taxes. So overall it brings about efficiency in taxes and that is how it adds to the gross domestic product (GDP). So I think it is good for the entire economy as a whole.
Cutmore: Modi has got a wonderful opportunity here because India as a buyer of energy is going to see tremendous benefits from this declining oil price. So if not now then it will be a missed opportunity.
A: Yes, I think in that sense everything is working well for India because we have never seen oil prices being what they are and it has a huge positive impact on India but if you look at it even from the various macroeconomic indicators point of view, India is very well placed. So you are right, this is the time for us to capitalise on the potential we have but we are on the right track.
Li: What about rate cuts because we have got that just as a surprise move from Governor Rajan and some say this is just only beginning because we might be in this deflationary spiral because of the weaker oil price?
A: But in India I don't think it was a surprise move. People were waiting for the rate cut, it was quite anticipated and in fact the 25 bps cut that has happened, it is just the beginning. We should see some more softening of interest rates taking place and I think that is going to be good for the economy.
Cutmore: What does it mean for your business specifically because I know the analysts that have looked at have talked about net interest lending margins could be bigger, could be a bit fatter but will that be easy in a market place where interest rates are coming down?
A: No, I think we should expect that net interest margins would be maintained because gradually cost of funds would come down and the banks would pass that on to the consumer so it should neither expand nor shrink.
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