8216;Structural issue around the rupee impacts PE industry8217;

The main problem is structural issue around the rupee and that impacts the PE industry.

Rahul Bhasin,Managing Partner,Baring India Investment

What is your opinion on the steps taken by RBI for reining the decline in rupee? Will it impact the PE industry?

I dont think measures are going to impact the PE industry. I think these are short-term reactions. There is enough speculation and this is the normal reaction of central banks when they think there is enough speculation. The main problem is structural issue around the rupee and that impacts the PE industry. There is a structural imbalance. Our consumption has been excessive and most of it has been financed by foreign investors who are looking at returns over a period of time. This is a very unstable equilibrium we are following. We need to get our act together on manufacturing. If we need to import,we should be able to export as much. We cant import and consume. We have forgotten these basics in the last 4-5 years.

What further measures do you think RBI can take to stem the fall in rupee?

I think the danger is of RBI doing too much. I think just preventing excess speculation is the right dosage and they should not be doing anything more than this. The real issue is of structural adjustments which has to happen from the fiscal side and the government needs to make its revenue expenditure and revenue receipts match. Though it makes the arithmetic work,it destroys the credibility8230; then you have food security bill8230; such bills erode the confidence in the fiscal regime and that puts pressure on the rupee.

Which sectors for the PE sector are looking good?

When the entire economy slows down there will be pain across the board but any body who has dollar receivables or can service international demand in any form would do inevitably better than others. I think pharmaceutical,IT,chemicals,speciality chemicals,and textile would benefit

What are the regulatory obstacles faced by the

industry?

There is a need to have a holistic tax regime around our industry. The government needs to invest in overall industry in trading contract enforcement. Then judicial capacity and ensuring that processes of contract are streamlined in the judicial reforms is the most significant measure required. The government should do all the collective things which a private corporation cant do,like urban planning,urban transportation,environment protection. I personally believe the government does too many things and all badly. They should do fewer things and do them well.