Conviction and confidence of FIIs on investing in India still remains high: A Balasubramanian

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With uncertainty mounting on the external front, what will be the impact on India?

The external environment is weak. From the country point of view, the first measure is to protect our economy. It means a stable currency that India is building up. India continues to be an investible destination from the global perspective. Foreign portfolio flows may not be large but certainly FDI may rise. Hence, it’s not an issue from the balance of payment front. The question mark will come from the export competitiveness. In the global market, if the currencies appreciate or depreciate and India doesn’t appreciate (or depreciate) accordingly, it impacts our competitiveness. The decline in oil is the big saviour of India, especially in keeping import bill under and control which in turn will help current account to be under control.

The market is very volatile these days. Is it time to worry about markets?

If you look at the market in the last 20 years, they have died and come back. You have seen it from the Harshad Mehta scam in 1991 when the index was 3,000. The worry always comes and goes. Overall, the economy will grow and earnings will improve. Nothing to worry about daily fluctuation.

Do you think the economy is moving on the right track and the ease of doing business showing any improvement?

The economy is getting strengthened because of the efforts being taken to push the growth. We are seeing progress in terms of activities in several sectors. We were also seeing progress in public sector investment in the last one year and are likely to witness (more progress) this year. We are also happy to see the progress coming from the state governments. Every state govt is focusing on increasing investments. The ease of business is not something that will come immediately. We have seen some progress from 142 to 130 in global ranking. Some more improvement may come next year. It is a gradual progress. But the expectations were very high… maybe the pace could have been faster especially on giving approvals.

Has rural economy revived? What’s in store in the coming year?

There’s a possibility that monsoon will be good next year. Probably we will see some agricultural employment coming this year. There’s a high possibility that the slowdown in rural economy in the last two years will reverse in 2016-17 and beyond that. In 2015 due to high inflation, there was a drop in savings rate. With lower inflation and oil prices, the resultants savings is adding to the rural savings rate. The government focus on curbing inflation is helping savings rate to go up.

Do you foresee any pickup in investments, a major factor that can boost the overall growth?

The private sector has already built up capacity in the last three years. I don’t see any incremental huge capex announcement from corporates. It will largely come from the government spending and also from FDI. The way we see it, there will be handful of companies at the top driving the growth and a large pool of small companies participating in the business revival and growth. There will be one or one-and-a-half year time-frame for that to reflect in growth and profitability.

Do you see a recovery in corporate performance?

It will be mixed. You will see performance improving in the case of those who are benefiting from the (low) commodity prices. They are not fully passing on the benefits to the consumer. We could see improvement as working capital finance is coming down. Therefore, 2016 would be the year when interest-led earnings for companies will be coming back. 2017-18 will be a great year.