Capacity utilisation levels have improved but businesses are wary of investing, Kotak Mahindra Bank CEO Uday Kotak said on Thursday, attributing India Inc.’s reluctant animal spirits to the barrage of bad news from around the world and some uncertainties on policy and regulatory fronts.
More than 66% of corporates’ capacity utilisation rates were above 80% in November, but just 15% of them plan to invest while others are waiting and watching, he said, citing a survey of 900 corporates conducted by his bank.
“So capacity utilisation in many areas is going up but people are waiting and watching because of a few uncertainties and that is where confidence, capacity building in a sector ahead of the curve… (will help),” Mr. Kotak said, stressing that he shared Finance Minister Nirmala Sitharaman’s view that industry captains must lift their animal spirits a lot more.
“There are a number of factors. The global situation thanks to COVID and Ukraine has made a lot of people in India more circumspect. There’s 24/7 news, you keep on getting a barrage of bad news from around the world. It’s got to affect your psychology and your mind and we are not immune to this,” he said, recalling that he had stopped reading leading financial newspapers during the 2008-09 global financial crisis for they only had ‘negative news’.
Speaking at the CII Global Economic Policy summit, Mr. Kotak said industry leaders must share ‘how do we take the bet without fear of you know… oh, what will happen to the world, what will happen to exports… what will happen to some policy change and the regulatory landscape’.
“There is concern in many areas therefore people are uncertain. Let’s unwind that and move forward,” he said, adding that India needs to take several steps to raise its GDP and per capita income, and rein in its ‘negative’ current account and fiscal balances.
“Our profit and loss (P&L) account in foreign exchange is we are earning less than we are spending. We need to get Atma Nirbhar on our current account. Second, I understand fiscal deficit on a consolidated basis has gone up worldwide after the COVID-19 pandemic, and India is at around 10% of GDP. We need to have a credible, consistent and resilient plan that we will get better on the P&L account even on the fiscal deficit,” he emphasised.
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