Indian financial mkts have matured substantially: Expert

What’s your view on the current economic scenario?

Huge amount of liquidity has been pumped into the system by the Central Banks world over and a good portion of this money has found its way in the stock market. The balance is either with the banks or has been partly used for lending to the private sector.

Thus,the buoyancy that we are seeing is still Central Bank driven. We need to see when the private sectors take this baton from the government so that we can see a sustained growth.

What in your opinion is the biggest challenge for the Indian economy?

High energy prices will come haunting very soon as the world economy bottoms out and it would be the basic challenge. Coupled with this would be the high rates of inflation that we shall see in the coming months with low growth rate.

If we look at things on a little longer perspective i.e.,10-15 years time span,food security & fresh water would be a major cause of concern. If we are not able to find solution for fresh water or develop high yielding variety of seeds,maintaining social stability would be the major task for the government.

How much time do you think will it take for the economies,to respond to the several fiscal measures,taken by the various Governments?

We are already seeing it & it is evident from the economic data from US,Germany,Japan etc. The question that now needs to be asked is how fast can we see the private consumption expenditure go up,so that we can see a consistent economic growth.

What fiscal or monetary measures,can the Indian Government take to ward off ripple effects caused by the global crisis?

The actions that had been taken by the US,Europe & Japan are quite adequate if we follow one line of thought,which is saving the capitalism & not letting this system correct itself naturally. If we look at India,I would be little more socialistic in my view & it would be appropriate if the government can waive of more debts of the farmers which has gained significance because of the low monsoon in the current year.

Another area that the government must reform for the long term growth to happen,would be to give lots of incentives to the industries that have high value addition to their products.

Markets globally,including India have started showing first signs of improvement. How much time span do you think will the market take come out of the crisis completely?

I think we need to ask the question again if or whether the market is improving or it has moved very close to the bottom. If we look at the US payroll figures,the job losses are still happening. It is just that the pace of the job losses have slowed. If look at the prices of gold,it is showing a definitive fear of inflation coming in.

If we look at the price of crude,it is indicative of $150 mark the moment we bottom out. So the entire situation is very fluid & it is difficult to define as to how & when can the world economies come out of the current scenario.

What role do you see for Technology in the next growth story?

To put it in two words,‘Technological Revolution’ will fuel the next growth cycle. Unless & until we have some alternative for the fossil fuels or fresh water or food the recovery cannot be long lasting.

What lessons,if any,can the private players learn from the current global crisis? What lessons can the states take for themselves?

Private sectors need to behave sensible,especially the banks who gave away credit two years ago without even looking at the fundamentals of the borrowers & now they are not even giving loans to the most eligible borrowers.

The state sector rather than increasing the number of regulators & the regulatory books must try to implement the already existing laws. I think that a major cause of the financial disaster has been the failure of the regulators to understand as to what was happening and to implement what has been written.

Comment on the present state of Indian financial markets.

The Indian financial markets have matured quite substantially over the past few years & it is just that the depth of the market that need to increase so that the volatility is reduced.

Certain amendments have been made to direct tax provisions in the Budget 2009. Which of the sectors do you foresee as benefiting from the same?

The pronouncement of releasing a new Direct Taxes Code as well as the introduction of the Goods & Services Tax from April 1,2010,will hopefully streamline and simplify the tax structure in the economy and is a welcome announcement. It is broad based reform and thus will have impact on efficiency of all industries.

Are the cross-border M&A (mergers and acquisitions) here to stay? Which all sectors seem to be most promising in terms of overall growth?

Yes! M&A will continue to be active in the International arena. Sectors like Pharma,Biotech,Alternative Energy would be the growth sectors.

How far do you think is the market dependent on FIIs?

Yes,it used to be couple of years ago. But now with the amount of funds available to LIC & other domestic institutions the role of FII’s is diminishing.

Lack of depth is one reason. Non activeness of domestic institutions is also reason for the market going up & then going down.

What are you views on the taxation of foreign-sourced income?

Logically there should be no tax from income coming from outside the country & specifically from the income that is generated by rendering of services.

The fundamental of this is that we should not promote outflow of our natural resources and promote money coming into our system from wherever it can with no questions asked.

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