Veteran banker Uday Kotak said that India needs more risk capital if it has to grow at 7 per cent to 8 per cent. It comes just after the International Monetary Fund (IMF) said that India requires urgent structural and financial reforms, given rising debt levels and the slowing economy. The economy needs to attract further risk capital by building trust among lenders, savers and investors, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, said at a CII corporate governance summit on Friday. The risk capital can be attracted by strengthening corporate governance by companies, Uday Kotak added.
India is seeing an economic slowdown currently with Q2FY20 growing at a six-year low of 4.5 per cent. The first GDP advance estimates show that the economy may grow at a rate of 5 per cent in FY20. The economic scenario is weaker than expected earlier and an accommodative fiscal stance is needed in view of a more accommodative fiscal stance in the budget, IMF said. Trust building produces returns that are justifiable and can’t be taken away by poor governance at the company level, Uday Kotak also said. The risk aversion has not only impacted the investors but also fund managers who are purchasing stocks with better PE ratio as against small and midcap companies, he added.
Even as growth slowdown has raised concerns, global rating agency S&P recently affirmed India's sovereign ratings at ‘BBB-/A-3’ with a stable outlook. The rating agency also said that the growth is expected to revive in the coming three years. India is seeing a cyclical rather than a structural slowdown, it also said. Last week, the RBI projected the economy to expand by 6 per cent in the next financial year.