Concerns over inflation exaggerated: HDFC honcho

Terming concerns expressed by some quarters over governance-deficit, tight liquidity and inflation in the country as "alarmist and highly-exaggerated", a leading banker today said that India is well-poised to achieve 8-9 per cent economic growth per annum over the next few years.    

"Some say there is a governance-deficit in India--I think it is too strong a word. There have been some lapses but on the whole, things have been good. To paint the whole nation as suffering from a governance-deficit, is, in my opinion, too harsh," Managing Director of HDFC Bank, Aditya Puri, said here.    

Similarly, though liquidity is tight, the fears expressed are "over exaggerated," he said, adding "there has been no shortage (of funds) to fuel growth." Puri said that governance issues have been recognised and the authorities are committed to it.

"We have a landmark legislation -- the Right to Information Act--and this plus e-governance initiatives will definitely enhance transparency. We need improvement but on the whole, I feel things are functioning very well."    

According to him, the Reserve Bank has indulged in a calibrated increase in its rates to combat inflation.

"There has been no runaway increase in interest rates--instead there has been a calibrated increase. May be over the next one-year, there will be a 100 basis points increase--probably between 50-75 basis points--but it will not be a major concern for growth," the HDFC Bank chief said.

On inflation, he said that it was not a matter of concern for India alone but for all emerging markets (EMs) as well. "It is a concern, yes, but it is being addressed," he said.

Food inflation has been persistent but a portion of it has been transitory, he said, pointing to prices of onions which had shot to a high of Rs 80 few days ago but now have fallen to around Rs 20 per kilo.

"People shouted from the rooftops when it (onion price) was at Rs 80 per kilo but now that it has fallen to Rs 20, nobody is writing about it," he said.

The Reserve Bank has upped its inflation projection by end-March to seven per cent from the earlier 5.5 per cent, which he described as "realistic".

"If growth is sub-8.5 per cent, then inflation will be at the lower end of the 6-7 per cent band," Puri said.