HDFC Chairman Deepak Parekh has come down heavily on the political class for what he calls self-induced problems that the Indian economy is facing.
“The only thing holding India back at this juncture is lack of political will to ensure a better future,” the HDFC annual report quoted him as saying.
Parekh said some of the problems have their origins in lack of fiscal rectitude, uncompromising coalition partners, inability to gain consensus on crucial legislation, stalled reforms, corruption scandals and a sense of apathy towards foreign investment, among others. “An increasing entitlement and subsidy-driven regime has resulted in a ballooning fiscal deficit,” he said.
Investors, Parekh said, can no longer be placated by saying that the long-term fundamentals of the country are still intact. It is equally important for investors to recognise that India is not a “top-down” story – it never was and perhaps never will be, he said. From an investor’s perspective, India has always been a “micro” story. It is a select group of companies that have constantly striven to meet world-class standards that has attracted global investors.
Pointing out that India’s growth rate is still impressive, Parekh said in such an environment, there was a tendency to be blinkered by pessimism. “No doubt, business confidence in India has sunk to a low ebb. Fortunately, the same is not the case with consumer confidence. It is ironic to see the coexistence of falling business confidence but rising consumer confidence,” he said.
Parekh also dwelt at length on India’s urbanisation and said the skew of urban lands is evident in the fact that the top 10 Indian cities are estimated to produce 15 per cent of the GDP with 8 per cent of the population who occupy just 0.1 per cent of the land area; and, the top 100 largest Indian cities produce 43 per cent of the GDP with 16 per cent of the population occupying just 0.24 per cent of the land area.
A comparison of BRIC nations (Brazil, Russia, India and China) reveals that India’s pace of urbanisation ranks the lowest. Cities are centres of growth, employment generation and innovation, and yet India spends barely 0.1 per cent of its GDP on urban development, whereas the minimum requirement is 0.25 per cent of GDP per year, he said.