India Inc. and the government need to take a more institutionalised approach to funding the country's startup space, according to Sanjiv Bajaj, President of CII (Confederation of Indian Industry), and Chairman, MD & CEO of Bajaj Finserv. Speaking to CNBC-TV18, Bajaj emphasised the need for competition in the lending space to avoid concentrated impact situations like the recent crash of Silicon Valley Bank (SVB).
“For any lending institution, particularly a bank, balancing and making sure that you have a conservative balance sheet is very important. Your ALM mismatches need to be minimal because otherwise, problems like SVB can arise. Secondly, this single bank SVB provided a significant part of their lending to startups and took care of their money. While I am sure they did a great job there but we clearly need some competition over there so that we don’t reach a situation of such concentrated impact like this one could have been,” Bajaj said.
He also stressed on the importance of a more holistic approach to funding startups, including working capital, debt, and equity. Given how India is the third-largest startup nation in the world, it needs a more “institutionalised” approach and it cannot be left to the larger independent environment, according to Bajaj.
He commented on the Indian economy's recovery from the pandemic as well, calling for the country to "decouple" as far as the interest rate cycle is concerned. He noted that India is now in a good position for growth, with inflation coming under control and the government increasing infrastructure investment.
“We are seeing high capacity utilisations across multiple sectors on the private side and these sectors are ready for investment, but they need to see consistent demand-led growth. So, we hope that the RBI uses this as a trigger to pause and decouple as far as the interest rate cycle is concerned. And this should then put us on the firm path to growth. I realise that we are still very much part of a connected world but we have to be nimble if the situation changes dramatically down the line, one can always review,” he added.
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Bajaj discussed the unequal growth seen in India, with the middle and upper-middle classes saving money while the lower-income classes struggled with the pandemic's impact and inflation. Rural India also saw lower spending than urban areas. “I believe that while this year, we will close probably with a GDP of six percent growth, next year could be 6.5 percent. The opportunity for us is to see that how we align all our dots so that as we go into the next year, by the second half of next year, we start outgrowing these numbers,” he added.
Bajaj also noted that the country saw a significant shortage of jobs last year, which is “partly balanced” at the moment. Hiring, as per Bajaj, has started in a few sectors and based on further demand growth, the numbers could grow in the future.
“We are going through a phase where India is opening up to becoming that manufacturing and services hub for the world. This means we have to make sure that we have the right skilled jobs ready, we have to make sure that they are competitive and efficient.”
Talking about India becoming a manufacturing and services base for the world, Bajaj said, “we need to ensure that a high level of governance transparency, remains in what we do. But it's equally important that we create keeping in mind what's happening globally, but we create a set of policies that makes sense for us as a country, and we make sure that we have enough discussion and debate on them, and then open up a window in which we implement them.”
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First Published: Mar 13, 2023 3:47 PM IST
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