It’s Govt’s Responsibility to Support Entrepreneurs: Nilesh Shah

Shah is of the opinion that investment is curcial for India to become a 5 trillion economy.

‘Invest in midcap, smallcap after the budget’, says Kotak Mahindra Asset Management MD, Nilesh Shah. 

Photo: The Quint

Video Editor: Sandeep Suman and Varun Sharma

The first budget of Modi government 2.0 is going to be presented on 5 July. What are the big announcements we can expect? We Have financial expert Kotak Mahindra Asset Management’s Managing Director Nilesh Shah to help us out.

What will be the road map to end liquidity crisis in NBFC sector?

In the NBFC sector, the crisis is limited to a few companies, where the liability franchise is weak. These borrowed money for three to six months and invested it in five to ten year long assets. Not a lot can be done for these companies in the budget. What needs to be done has to be done outside of the budget. In some NBFC companies, Asset and Liability management (ALM) imbalance is being witnessed. For these, if a re-finance window is created, this sectors’ liquidity issue could be reduced to a significant extent. 

Which sectors need urgent attention?

The finance ministry needs to see that in the last two quarters, our economy has been going through a soft patch.  In December 2018, our quarterly growth was 6.6 percent. In March 2019, it went to 5.8 percent. If we want to become a 5 trillion dollar economy the growth rate needs to increase. There are different ways to bring up the growth rate. The RBI has one where it keeps an interest rate which benefits the entrepreneur as well as the saver, and, also keeps inflation in control. Another method is where it (RBI) provides a liquidity to entrepreneurs which can give them capital so that they can invest. It is the government’s responsibility to support the entrepreneur.

How do you see fiscal deficit?

The path of fiscal discipline which we have taken in the last five years has led to micro-economic stability. Today, if you earn Rs 100 and spend Rs 105, the future generation bears the burden of this Rs 5. More importantly, if this Rs 5 is spent on consumption – paying salaries, pension, etc, and you don’t create an asset this burden becomes unserviceable. So, it is important for us to spend in proportion to our earnings.

Shah is of the opinion that for India to become a 5 trillion economy, investment is crucial as well as the need of the government to balance the budget.