India in a better position to manage Fed rate hike: Anshu Jain

Interview with Former co-CEO, Deutsche Bank

Anshu Jain, former co-CEO of Deutsche Bank, quit the German bank in June this year after a career spanning three decades in the banking sector. Sudipto Dey caught up with Jain on the side lines of a panel discussion organised by McKinsey Leadership Institute on Leadership and World Economy. Edited excerpts:

On the impact of interest rate hike by the US Federal Reserve

The Federal Reserve move - which is likely to come in December - could have a profound impact on emerging economies. History tells us that when interest rates in the US have gone up, capital has flown out of emerging economies. It isn't coincidental that emerging market crises have been preceded by US rate hikes in the past. I particularly worry about countries that are exposed to commodities, countries which export commodities, and countries that have a high level of dollar debt, and countries that are highly geared towards export.

India is in the fortunate position of not having those many exposures. Indeed, the fact that India is a net importer of energy represents a dividend for India. It is currently not particularly geared towards exports, but towards domestic demand, which remain robust.

India's economic policies over the past few years have led to the creation of healthy (foreign exchange) reserves. Even if there is an FDI (foreign direct investment) outflow, India is in a better position than most other countries to deal with it.

On going beyond the Make-in-India campaign to attract foreign investors to India

A lot has been done to encourage FDI lately. Top-down measures will go only so far; it is critical to move India up on the ease-of-doing-business index. Some very ambitious targets have been set on this front; let's hope those targets are realised.

On the stress in the Indian banking sector

There are others who can comment with greater direct experience than me about the stress in the Indian banking sector. My broad view is that no economy can grow without credit creation, keeping up with GDP growth. India has one of the lowest credit-creation ratios to GDP in the world. If memory serves me right, it is below 60 per cent. This, if left unaddressed, will inhibit GDP growth and job creation. The availability of credit, and the cost of it, puts India at a disadvantage. A comprehensive financial and banking sector reform is, I am sure, a priority for the government.

On working with the government on some projects in India

I remain optimistic about India's economic prospects and have always enjoyed my interaction with both business and policy decision makers.