New Delhi: Noted Indian banker Uday Kotak has outlined seven key recommendations for propelling India to a $30 trillion GDP by the year 2047, coinciding with the nation’s 100th year of independence.
In a comprehensive analysis, Uday Kotak emphasized the transformative reforms that have turned Indian savers into investors, marking a significant shift in financial preferences.
Kotak highlighted the evolution from a scenario where savers were hesitant to invest in financial assets, preferring gold and land. Over the years, developments such as mutual fund platforms, cash equities, derivatives markets, and global private equity in India have successfully converted savers into investors.
The veteran banker’s seven recommendations include:
1. Bubble Avoidance: Implement policies, regulations, education, and ensure the supply of quality paper to prevent bubbles. Kotak emphasized the need for companies to raise equity at a lower cost of capital for productive use.
2. Debt Tax Arbitrage: India must avoid tax arbitrage in debt, emphasizing that without the growth of debt markets, it will be a one-legged race.
3. Double Taxation on Dividends: Kotak called for a relook at the double taxation on dividends.
4. Derivatives and Financial Market Distortion: Low-cost leverage through derivatives can distort financial markets, requiring careful attention.
5. Shift from Banks to Capital Markets:As savers become investors, Kotak suggests that the banking sector needs to address challenges with its deposits and cost of funds. Large corporates should meaningfully move to capital markets (debt and equity), reducing banks to distributors of corporate debt.
6. Avoid Retrospective Tax and Regulatory Regime: Kotak emphasized steering clear of a retrospective tax and regulatory framework.
7. Focus Areas:Urgent attention is needed in two key areas—acquisition financing and streamlining the IBC/NCLT process—to fulfill India’s aspirations.
Finance Minister Nirmala Sitharaman responded to Uday Kotak’s recommendations with gratitude, acknowledging his extensive experience in the financial sector.
Uday Kotak, founder of Kotak Mahindra Bank, resigned as the managing director and CEO of the bank earlier this year. The Reserve Bank of India recently approved the appointment of CS Rajan as the new chairman of Kotak Mahindra Bank.
India’s GDP growth for the second quarter of FY2024 stood at 7.6%, surpassing estimates and laying the groundwork for a promising fiscal year.
