The newly-established New Development Bank (NDB) in Shanghai, which was formerly known as BRICS Development Bank, is working towards achieving sustainable infrastructure growth and inking partnerships with various financial institutions in India and other emerging economies. K V Kamath, the bank’s chief who played an instrumental part in setting it up, recently visited India to attend an India-China business partnership summit. He spoke to Anurag Shah on various topics, Kamath, a former head of ICICI Bank, was exceedingly confident on his favourite subject — India’s economic growth. He said more focus should be on infrastructure development, while predicting that will turn productive in the short run.

K V Kamath
K V Kamath

Q. Can you tell us about the New Development Bank? How are the banks of the BRICS nations progressing? What are your targets going ahead?

A. Our main focus is infrastructure and we did our inauguration in July last year. Our next step is the recruitment and partnering phase. In India, we have signed a partnership agreement with the ICICI Bank. We have also signed partnership agreements with many more member countries. So, these two have been done, and our focus will be on infrastructure, and that is what we will concentrate on. The first set of loans that we have undertaken are all green, and we believe green today is not just that we want to do green but it becomes an economic imperative, our focus would be on funding green projects.

Q. Non-performing assets (NPAs) of Indian banks are on a steady increase. It is a trend seen in almost all sectors. Do we need to seriously work on this, or will the problem get settled?

A. You can see that 12 to 13 years ago, NPA problem in China was as huge as 50% of its GDP, and the GDP was something like $1.2 trillion. So, after cleaning up of all these, China’s banks are almost the largest banks in the world. So, the recipe for this is whether the growth is there or not. If there is growth and the assets are productive, they can be in use. According to me, whatever assets in India are productive will come in use when our economy is forecast to grow in double digits. My belief is that most NPAs will turn productive in the short run. Again, going back to what China did, their NPAs were 50% of the GDP. Our NPAs are probably less than 10% of the GDP. So we should make less noise about this.

Q. As you said, we are focusing on economic growth. What do the macro numbers such as the current account deficit, fiscal deficit, inflation, GDP tell us? How do you see India’s growth in the future?

A. According to me, the reform process has been set and now what we need is the growth agenda. In the sense, the tangible projects which would give growth need to be seen first. For this, I would like to watch the history – history of Vajpayee’s leadership. Key drivers were the infrastructure projects. Who did all this? The government – The quadrilateral projects, then the north-south-east-west connectivity project and then the Prime Minister Gram Sadak Yojana. According to me, these three projects were very effective. Infrastructure focus is a must. Various projects done by Nitin Gadkari and Piyush Goel are all basically engines. These engines have started working, and the rest of it will move on its own. The Modi government is on the right track and will soon resolve the outstanding issues that will help change the face of the economic growth in India. So, I used to be bullish and I continue to be bullish, and I think this country is going to change dramatically.

Q. The Modi government is about to complete two years. According to you, what are the two things that the government should focus on more in the next three years?

A. Simple, there is only one solution. The kickstarting of growth and reform by the government needs to be continued with focus. I am very confident that it will be achieved. The government must keep the accelerator pressed to the floor.

Q. India and China are going for many strategic partnerships and signing MoUs. So according to you, how can India learn from the Chinese growth model, especially in the manufacturing sector?

A. It’s a common perception that China is the factory of the world, the manufacturing sector is the driving force for China’s growth. With rapid transformation, China’s service sector contributes 46% to its GDP; the rest is industry and agriculture. The services sector is the biggest employer in the world. Service sector gives jobs to 300 million out of the 765 million workforce. The services sector will drive China’s growth and will contribute to 60% of their GDP. Indian knowledge & services firms including IT firms have massive growth opportunity in China as they transform their economy. Successful ecosystem between Indian knowledge & services and Chinese industry is a win-win for both the countries if Indian companies deploy their excess capacity to the vast Chinese market, thereafter leveraging the global opportunity out of China. Chinese companies have the opportunity to showcase their enormous soft skills in depth in the new growth load that is India.

Q. Over the last one year you have been staying in Shanghai after setting up the New Development Bank. And for a long time, you stayed in Mumbai. What do you think Mumbai can learn from Shanghai? How can it transform like Shanghai?

A. Shanghai is my adopted home. I visited Shanghai for the first time in 1988, and then after in every visit I have seen signs of change – construction of high-rise buildings, construction of towers and so on. On every visit, I have seen changes – rapid changes, and I could not believe the speed of change. Shanghai has changed to be a world-class city with high rises, elevated roads, world-class mass transit, tunnels, etc. I am impressed with what has been achieved by Shanghai. With the signing of the MoU, I see an opportunity for close collaboration between Shanghai and Mumbai for transforming Mumbai in the footsteps of what has been achieved and demonstrated by Shanghai. We, at New Development Bank, are happy to partner in the development and I am sure it will happen – as Mumbai is my hometown.