Desai: Its coming at a point which is quite critical in our economic cycle, we are facing very difficult global situation. So the world is not going to help us, our fiscal deficit has expanded and there were a lot of numbers debated in the previous session. Our own estimate is that on a consolidated basis that number is around 12.6% for the year that ended yesterday.
On a projected basis things are looking slightly better because of the crude oil, the fertilizer deficit is reducing but we don’t know how much tax revenues will fall. The point is that we are starting with a situation where fiscal deficit is high and at the same time we need to spend money. So I don’t disagree with the political comments that we need to spend money as a government, it’s a difficult government balancing act. So whichever government comes to power, it needs to execute and that has not been the forte of some governments in the past and that is the challenge that we face as an economy.
I think India will start doing better than the rest of the world because we don’t have a balance sheet crisis in the banking system, we do have an NPL crisis, there will be a deep NPL cycle in the next 12-18 months but its not a balance sheet crisis. We have a growth rate which is likely to be better than most parts of the world. It will be definitely slower than what we had in the last five years but better than most parts of the world infact maybe the second or the third best in the world.
The only challenge we have is this fiscal deficit which is staring at us and it needs to be fixed and we need some stimulus in the next 12 months, so that the economy has some support. That’s where the government’s importance is and if we get a good election result or if we get a government that has capability to execute then I think we should start outperforming the rest of the world in the forthcoming 12 months.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at email@example.com