India is likely to grow at 5.5 to 6 per cent in FY15 and can get back to the 7-8 per cent per year economic growth in the next four years, according to HDFC Chairman Deepak Parekh.
“The worst is certainly behind us and I would expect GDP growth in FY15 to be in the 5.5 to 6 per cent range…We cannot expect from 4.7 per cent to 8 per cent in the next year, but we can aim in four years,” Parekh said while addressing a BFSI conference organised by SBI Capital Markets.
On expectations from the Union Budget, Parekh said, “In the infrastructure sector, the low hanging fruits, i.e. the projects that are stuck, need to be cleared… then the cash flows will start coming in, restructured assets will come down, banks will be in a better position and once the backlog is over, we can expect new investments.”
He said with a change in the economic environment, some of these projects will get off the ground, and going forward, banks’ bad loans will start declining.
Parekh highlighted that four major central banks (the Federal Reserve, Bank of England, ECB and the Bank of Japan) are likely to show policy divergences.
The Fed and BoE are expected to slowly start raising interest rates, while the ECB and Bank of Japan are likely to continue easing. “So, one is going to see increased activity and volatility in the currency and bond markets.”
According to him, there has been a complete re-rating or India in the last few months with FIIs investing nearly $16 billion in India’s equity and debt since January.
He said, “The stock indices have risen 20 per cent in the year so far, making India the flavour of the day.”
He also said with public sector banks needing $100 billion capital in five years, the government can raise a part of it by reducing its shareholding in these banks, issue more non-voting shares and off-load non-core assets.
To conclude, he said, “If pizzas are being delivered by drones today, one can be imaginative enough to believe that banks too may possibly be run by drones! Drones may well take care of risks like reckless lending, greed for higher bonuses and other moral hazards.”