SBI Conclave: India on cusp of recovery; fresh private investment key to sustainable post-pandemic growth, say experts

Numerous macro indicators suggest that the economic recovery is now taking hold after the beating it had taken during the pandemic. But for growth to be sustainable and reach its potential, private capital investment has to resume, the Reserve Bank Governor said on Tuesday. RBI Governor Shaktikanta Das said the economy has the potential to grow at a reasonably high pace in the post-pandemic scenario, provided private capital investment resumes.

But there is a lot of unfinished business that needs to be addressed by the government, the central bank, as well as industry. To discuss this, CNBC-TV18’s Shereen Bhan spoke to a panel of eminent experts, including Nadir Godrej, Chairman of Godrej Industries, Anish Shah, MD & CEO at  Mahindra Group, Sanjiv Mehta, Chairman & MD of HUL, Hitendra Dave, CEO of HSBC India, Vellayan Subbiah, Chairman of Cholamandalam Investment & Fin, Kunal Shah, Founder of CRED and Dinesh Khara, Chairman of SBI.

India Inc believes there are early signs of the current demand recovery being sustainable and the Indian economy being on the cusp of seeing a turnaround in investment cycle.

Anish Shah said that India is at the cusp of seeing the investment cycle turn. He said, “We are seeing recovery across many segments. Rural has played a huge role over the last couple of years and for that I would credit the actions taken by the government early last year at the start of the pandemic, when a lot of funds were released through various schemes that combined with the monsoons have had rural really play the position of strength for our economy.”

He added, “Urban did get hit by the pandemic a lot more but over the last few months, we are seeing that comeback very strongly. Our concern right now still remains in supply chain, we are seeing huge disruptions around the world and on commodity prices. Inflation is a potential concern as well.”

On PLI to manufacturing, Mehta said, “India has a very small share of the global trade and either we press hard where we have a natural advantage, competitive advantage, or we create competitive advantage. Now, from that perspective, I think PLI serves both purposes. It will give a fillip to manufacturing and very importantly, it will help industry to create competitive advantage when it comes to exports.”

On corporate book expansion, Dave said, “I think the aggregate data is a little misleading because you have had very large companies raise a significant amount of equity or have experienced unprecedented operating cash flows. So companies in core sectors like cement, aluminium, steel, and we obviously had a very large fund-raise by India's largest company. So, when you look at corporate credit expansion, I think you need to incorporate the fact that there has been almost Rs 200,000 crore of loan repayment by some of these companies. That is not a small number to overcome through fresh expansion.”

Talking about profitability of start-ups, Kunal Shah said, “We see strong demand of investors because they see a change of consumer behaviour and I don't think this is reversible. It is an irreversible change that we are going to see in consumer behaviour and more and more efficient things are going to be in demand. We are going to see probably 20 more unicorns. My prediction in the next six months or so or more actually, and all of them may not see profitability, but yes, the revenue growth is an immense amount."

Subbiah said, “Honestly, I would say that there could not be a more exciting time for India. I think, what has happened is a result of the pandemic, and what has happened subsequently. I think, has honestly opened up India in a way that I don't think we can even imagine. As you said, it is a confluence of different things. However, the way I see it is a number of white spaces that exist now are more than we have ever seen since independence and that just means that it is incumbent on us and industry to go starts taking territory and that has what beginning to happen.”

On investment and private consumption, Khara said, “When it comes to the recovery path, I think the first and foremost is a demand from the individuals and that is something where we are seeing significant growth. We are growing as far as our retail on the book is concerned, we are growing almost at a CAGR of 14 percent for our last three years. So, that is something which gives us confidence. I believe it is the beginning of the investment cycle, there is always a lag between the demand and the actual investment which happens on the ground.”