Even as the world economy is facing macroeconomic challenges, the Indian economy has been termed as relatively stable and so have been the Indian equity markets. Anand Rathi, chairman AnandRathi Group told Sandeep Singh that India should target a GDP growth rate of at least 8-10 per cent for the next decade or two. Stating that India needs to build infrastructure at a faster pace, he also said that it was important to ease regulations and trust people in order to nurture entrepreneurship and business environment. Edited excerpts:
How do you see India in the current global environment?
I think it is the beginning of India taking a different turn and role with respect to the western world. While I think that we may not be able to replicate what China did, we are moving in that direction in terms of growth. A lot of changes that have been pushed by the government over the last few years have been far reaching ones and I believe they will have an excellent effect.
India should target a minimum GDP growth rate of 8-10 per cent for the next 1-2 decades to take care of the population it has.
Historically, if we look at any country, their highest growth was achieved when they were developing their infrastructure — a long-term investment — and that is what is going on in India, though at a slower pace than desired. If that is one area we need to address, another area is capital goods and defence.
I am hopeful that the changes would be visible from this decade onwards and we won’t miss out on the opportunities that are there. India is going to be a happening place and there is going to be faster growth.
What is required from the government to achieve this minimum 8-10 per cent growth?
Government has played a key role in whatever we have achieved so far and the biggest act was opening up the economy in 1991. Even going forward, it has to play a role but the key advantage that India has is its entrepreneurship. The country has reached to this level because of the huge entrepreneurial drive. I think managing business in India is most difficult in comparison to anywhere in the world, but still people have succeeded as they are willing to face hurdles and difficulties as they grow.
We have to make it easier to do business in India and all reforms will have to be part of it. While we have done away with some approvals, but at the same time some more are being added. I believe that bureaucratic involvement should be reduced. I can see that some administrative departments take 6 months to a year to approve. An individual may have the land but he can’t do anything. Besides that, we also need agricultural, land and judicial reforms.
What are the key challenges that you think can come in the way of India’s growth?
Infrastructure is the first and foremost challenge; second is reforms which we need particularly to make it easy to do business. Third, our financial system should become stronger and availability of money — debt or equity — should be easy.
At some stage, people are a bit scared and the system of trust has taken a beating. There is a feeling of distrust and we need to make things easier for people to both live and do business. We have enormous opportunity and entrepreneurship and if we can do that, India will take-off.
While huge investments have come in equity markets both from domestic investors and FPI, don’t you think the investment basket has not increased and that is creating some risk?
There are companies that are growing from small to medium cap and from medium cap to large cap, but yes we need more companies. I would say that there are many companies in India that can go public but many promoters feel that there is too much regulation. So, sometimes overregulation, which is something we must look into, is a concern. In fact, many people are even thinking of taking their publicly listed companies, private. There is a sense among promoters that even though they have 70-75 per cent stake, they are made answerable to everyone.
I believe that regulation should be minimum and there has to be trust in people. How much can you regulate? Whatever regulation you have, some bad apples will always be there. One basic principle is that there must be trust between the government and the people. What we have seen is that additional powers that are being given to various authorities is resulting in more misuse than use and it is emerging as a big challenge.
What would you advise a retail investor?
I think that retail investors should leave equity investment decisions with mutual funds. They should not become a risk fund and should not put money in risky assets, but instead go with proven companies. Equity is a great investment avenue and I think it is the best way to put money, if it is meant for the long term. I expect 13-15 per cent CAGR over the next 5-10 years.