India is ‘capital starved’, needs to work towards getting capital to become USD 5-trillion economy: Ajay Piramal

India is “capital starved” and if the country has to meet its aspiration of 8 per cent growth to reach USD 5 trillion economy, it needs to work towards getting capital, Piramal Group Chairman and Executive Director Ajay Piramal said on Thursday. Speaking at the Times Network India Economic Conclave 2023, he said India must learn from the rest of the world and allow pension funds and provident funds to invest into many companies instead of restricting them into investing mainly on government securities.

Piramal, who was bullish on the future of the Indian economy, said this is the best time the country has had and “we want to grow faster”.

Pointing out concerns towards achieving the higher growth, he said,”…if India has to grow at 8 per cent GDP, which is what our aspiration is if you want to go to a (USD) 5 trillion, and then 10 trillion, generally in real terms…then credit must grow at approximately 18 to 20 per cent.”

He said credit growth of 18 to 20 per cent has never happened in India.

“I don’t think we have the banks or the NBFCs or anybody who can grow it that much. So we are capital starved and therefore we have to work towards getting capital,” Piramal asserted.

There are many opportunities that India can learn from what the rest of the world has done, he said, adding the country can look at opening up pension funds and provident funds etc, which are currently not allowed to “invest in too many companies”. “With the regulations becoming tighter and better in India, I think we will have to open this. These funds are available. Today 50 per cent of all these funds go into government securities, I think they must be allowed to be invested into companies,” Piramal said. He cited the examples of Canada and Singapore, which have used pension funds to invest in other countries and get good returns for their holders.

Piramal also expressed concern that “the cost of capital in India is extremely high and we are becoming very, very uncompetitive, and I don’t think we can raise a 10 per cent growth unless we open this up.”

He also called for opening up the banking sector by giving licences to more private players.

“I don’t know what the hesitation is to give banking licences to private players,” he said, adding after the banking licences were given two decades ago to the likes of Kotak, HDFC and IndusInd, there’s been no major bank that’s come up.

Piramal further said,”And we’ve seen these have been successful. So why not give it more and now the regulators in India are much better. I feel that shortage of equity, shortage of debt is going to be a constraint.”