ICICI Bank Chairman K V Kamath today said the Indian economy could grow by 8.5 per cent in current fiscal, but warned the government against massive borrowing saying this would obstruct banks from lowering lending rates.
Advising the government to look for alternative sources for raising funds to pursue its employment and rural economy programmes, which he termed as a must for high growth, Kamath said, "I think we have hit the road at a pace where we can aspire for 8.5 per cent growth in not a difficult way."
At the same time, he cautioned that the government's massive borrowing programme was putting pressure on the market by keeping interest rates high.
"What is required from the government at this point of time is an articulation of thought as how this gap (between public spending programmes and required funds) will be bridged and the government has several ways in which it can bridge the gap," Kamath said.
Elaborating on the alternative sources of funds, Kamath said, "For example, it could (selectively) divest (in PSUs), it could offload spectrum."
"I am reasonably sure they are thinking about this (alternative mechanism of resource generation). All they need to do is to articulate to the markets so that it could pull up the market," the ICICI Bank Chairman said.
"I think, some more clarity from various authorities will help the market," Kamath said, adding, Prime Minister has already hinted towards disinvestment plans.
Kamath said the government's efforts have paid off in terms of pumping in liquidity, providing the needed support to industry and markets, and a whole range of other initiatives taken during the crisis period last year.
"This is a key reason, why we are back at 6.7 per cent growth. Besides, inflation has eased, confidence is back in the industry and corporate profitability has not been hurt as much as anticipated," he said.
"The liquidity situation is good. The country is able to meet its liquidity needs," he added.
Going ahead, Kamath said, the government's support was required in form of supporting the rural economy, as it did last year.
"The government should continue to boost the rural economy through, whether it is employment guarantee scheme or other initiatives, and then continue to stress on infrastructure building and putting right people in charge of infrastructure in the government," he said.
"We have hit the road running and we will be able to accelerate fast. I think the government would need to do two things — one support rural India and second support infrastructure building," he added.
