In spite of current slowdown in the Indian economy, P K Choudhury, vice-chairman of ICRA and CEO of the ICRA Group, is optimistic about the India growth story. In an interview with Namrata Acharya, Choudhury, talks about how the economy can rebound through reforms in capital markets and agriculture, and investments in the infrastructure sector. Excerpts:
Do you think India has lost its credibility in BRIC club due to the prevailing political and economic conditions?
I don’t think so. Every economy goes through ups and downs. India has earlier come out of economic crisis. This is a temporary problem.
What the reason behind your optimism, as even Prime Minister had said that India might be heading towards a 1991 like crisis, and GDP growth number projection is as low as 5.5%?
I don’t think 5.5% is a low growth number. Compared to peer groups, India is in a better position. Going forward, if there is right economic environment and right leadership, achieving a higher growth rate will not be difficult. The political leadership has to be dynamic. I think the process of reforms has just started. The events of recent days have given us hope.
What is your policy prescription for the government?
There are three areas, where we need more reforms. First is, capital markets. We need more easing out of the capital markets. Second is infrastructure. Once, investment in infrastructure starts, there will be capital flow to all other sectors as well. The third area is agriculture. Not proper attention is being paid to the agriculture sector, even though we know its contribution to the GDP is quite significant.
You did not mention FDI in retail as a part of policy prescription.
I would like to reserve my comments on the issue.
What is your projection about GDP growth?
This year, it should be 5.5%. However, the year after, it should start picking up. We expect 6% growth in the next year.
You mentioned reforms in the capital markets. Can you elaborate, what reforms are you expecting?
I would like to see further easing of procedures. Also, in the banking system, the recent cuts in CRR points to the easing of monetary policy.
What are your expectations from the upcoming RBI policy? Do you think that RBI will cut repo rate?
I think, RBI will wait and watch. They might do something like a CRR cut. But, I don’t see any dramatic change.
Are still rating downgrades more than upgrades?
Yes. The downgrades are still much more than upgrades.
Is the Indian credit rating market overcrowded?
Yes it is. There are too many rating agencies in India. There are competitive pressure. Only a few countries have as many rating agencies as we have. We have six rating agencies. Most countries don’t have more than two or three. When there is too much of competition, we see a) compromise in rating b) compromise in the process of due diligence. Thankfully, in both the front, Indian rating are not facing such situation.
What are ICRA’s expansion plans?
We are looking at new geographies in Asia. We are expecting a licence today itself, and an announcement will be made soon.