As the global mood has turned sombre after two boom years amid reversing liquidity and war, the world is looking up to India to step up, according to Sanjiv Bajaj. But inflation, he said, needs to be tamed quickly.
“Davos is right now [happening] in the middle of war, middle of reversing the liquidity boom of the last two years, and rising interest rates. The mood is gloomy, “Bajaj Finserv Ltd., told BQ Prime’s Menaka Doshi on the sidelines of the World Economic Forum in Davos on Wednesday.
“But by that same account, as I’m talking to people, they are all looking to India as the one country that can step up and in a number of sectors become the manufacturing hub for the world,” he said. “Initially, it may be China plus one. But over the next decade, there is no reason why we should not play a stronger role.”
He expects the government’s focus through the performance-linked incentives, cutting corporate tax to pay off. A number of sectors in India are seeing uptick in capex cycle, Bajaj said, adding not just commodities, but also real estate and construction, and logistics.
Food and fuel prices have hurt the common man, he said. The country, however, will have to tame inflation in India quickly enough to get the domestic consumption engine “roaring again”.
While controlling oil prices is beyond control, India should be talking to companies to balance out global needs, he said.
The Reserve Bank of India has started increasing rates and also withdrawing liquidity from the market to tame inflation.
“India is at 70-80 bps [below] from where we were at the start of the pandemic, hence a normalization of [policy] rates should happen, ”Bajaj said. “It will temper demand and hence inflation, but a large part of inflation is on the supply side.”