India's growth story intact: K.V. Kamath

I think we are a little late: Kamath on inflation

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Staff Reporter | 02 May, 2008
India's growth story is intact and the economy will expand by 8.5-9 percent in the current fiscal, driven by a strong corporate performance, says an optimistic K.V. Kamath, the new president of the Confederation of Indian Industry (CII).

"In the past three weeks there is, indeed, a renewed optimism on India's economic outlook. The strong corporate performance for the fourth quarter of last fiscal, which we are witnessing, is a valid reason for my assessment," he said after taking charge of the chamber Thursday.

"My outlook has changed in the past three weeks. I am now driven by optimism and would say that the Indian economy will grow by 8.5-9 percent during the current fiscal," Kamath, the first banker to become the president of the apex industry lobby, told IANS in an interview.

The 61-year-old electrical engineer, nevertheless, said some key challenges remained for the economy and listed them as rising commodity and energy prices, balance of payments pressures, supply constraints, infrastructure gaps, stagnating farm output and equitable growth.

"Each of these must be addressed in a calibrated manner," said Kamath, who also holds a master's degree in business administration from the Indian Institute of Management at Ahmedabad.

According to him, some $700 billion worth of investments were in the pipeline for India Inc - half in manufacturing and the remaining in infrastructure.

"There is no cutting back on that," said Kamath, who is also the chief executive of ICICI Bank. "The share of manufacturing in India's gross domestic product will go up to 25 percent by 2020 from 15 percent now."

He said against 593 Indian companies that had net profit growth of more than 100 percent in the first three quarters of 2006-07, the numbers had expanded significantly to 622 in the corresponding period of last fiscal.

"The topline and the bottomline growth of 17.5 percent for Indian companies creates the much needed room for capital expenditure this year," he said, adding that the savings and investment rates were also robust at 34.8 percent and 35.9 percent, respectively.

Speaking about rising inflation, Kamath felt the government could have acted earlier, but quickly added that the measures taken by policy makers and the central bank in recent weeks should bear fruit in the weeks to come.

"I thought we were a little late. Things could have been done two-three months ago. Now, I think some significant measures - both fiscal and monetary are being taken. I am quite satisfied. Also, it is important that the government does not want to forego growth."

He said the Reserve Bank of India has targeted to bring the annual rate of inflation - presently ruling at 7.33 percent for the week ended April 12 - to below 5 percent, "and I am optimistic that the central bank will achieve that."

Speaking about the larger economic canvas that India Inc should focus up on, Kamath said Africa was the way to go in terms of engagement in trade and investment. "Over the next five-seven years, it will be amazing to note where Africa is today and where it can go," he said.

That, he said, was one of the reasons why four of the five new international offices that CII intends to establish this year were in Africa - Addis Ababa, Accra, Kinshasa and Johannesburg. The fifth office is intended in Beijing.

He also maintained that the recent India-Africa summit organised by the Indian government - where the industry chamber was an active partner - was a reflection of New Delhi's seriousness in engaging with Africa and the opportunities that existed there.

"China had the opportunity of taking away the low-hanging fruit," he said referring to the major Africa conclave organised by the Chinese government in 2006. "But we are also there. There is an opportunity for us in Africa and it should gain momentum over the next few years."