‘Worst is over,we will now get back to more normal growth’

The deputy chairman’s statement is the clearest indication so far of the importance the government is expected to place on infrastructure in the Budget,and through the rest of the year.

Ahluwalia assured the bankers that the economy is in good shape and that they should not have any fear in financing infrastructure projects on the premise that the economy won’t be able to sustain it. The deputy chairman acknowledged that bank credit is much easier “than it was until 4-5 months ago”,but more needed to be done.

His line of thought was endorsed by HDFC chairman Deepak Parekh,who said the Indian banking system was flushed with funds but commercial banks were parking these with the Reserve Bank of India.

“The demand for credit is not rising in line with the liquidity,As a result,I think the lending rates are likely to go down further. I expect the rates to go down by at least 50 basis points over next six months.”

As a component of the infrastructure sector,Parekh said,demand for affordable housing (up to Rs 30 lakh per unit) is on a constant rise as property prices have corrected much in this segment. “HDFC’s loan disbursement in this segment is improving on a month-over-month basis in the current year.”

Former Reserve Bank governor Bimal Jalan,too,said he was concerned about the spread between the actual lending rates and the repo rate — the price at which they source money from the RBI. “This is something the RBI will have to look at closely,” he said.

The current repo rate is around 5.5 per cent and the banks are lending at 11 per cent rates.

“A huge gap of around 600 basis points,” Jain

asserted.

Ahluwalia also said the Indian economy should show firm signs of revival during the second half of 2009. “Though the economic recovery has already kick started,I think it is reasonable to assume that the worst is over. And now it will get back to the more normal growth.”

The theme of the three-day conclave is the transformational potential of the Indian economy within the next three decades.

Centennial Group president and chief executive Harinder Kohli said,“The studies we have carried out have taken experiences of over

150 countries to develop the scenario. India has the potential to grow from contributing 2 per cent of the global GDP to 16 per cent of the GDP by 2039.”

But to do that the overriding observation that emerges from the experts is that Indian policy makers need to be proactive and anticipate change better,said IDFC managing director and chief executive Rajiv B Lall.

Zia Mody,senior partner with leading law firm AZB & Partners,said,“The debate and discussions related to political and governance problems in India will be welcome.” FE