New Delhi: Commending the Modi government for a reform-full first year, top banker K V Kamath has said that lower inflation and moderating commodity prices also paved the way for policies to become more supportive of the growth.
Kamath, who has been nominated by India as the first chief of USD 100-billion BRICS Bank, also said that various policy and administrative measures announced by the new government would bear fruit over the medium term and the steps that have been taken are "clearly in the right direction".
He said that the long-term impact of various reforms announced by the Modi government over the past year will reap rich dividends for the country and for its ability to achieve and sustain high rates of growth.
Showering fulsome praise on the NDA government, which assumed office a year ago on May 26, 2014, Kamath said that "the decisive mandate in the general elections was a very positive development for the economy."
"The immediate impact was felt in the form of a strong improvement in sentiment," he said.
In his annual letter to shareholders as Chairman of ICICI Bank, Kamath further said, "The economy also benefited from the sharp drop in commodity prices globally. Lower inflation and moderating commodity prices paved the way for the policy framework to become more supportive of growth."
He said India's inherent strengths include demographic dividend and its vast investment potential, which has the country "on a high growth path for several years, before we experienced a sharp and sustained slowdown due to a combination of domestic and global factors".
"In fiscal 2015, we saw renewed confidence that India's growth potential would be realised on a sustainable basis, as the necessary policy and administrative measures would be put in place to harness the underlying growth drivers.
"Over the last year, the government has taken a number of important steps in this direction. There has been a focus on improving governance, enhancing the ease of doing business, creating a conducive environment for investment by both international and domestic participants, and adopting a stable and prudent fiscal policy.
"At the same time, the Government has sought to bring about the engagement of more and more people in the economic mainstream," he said.
Kamath further said that the new government has taken a number of steps to kick-start the economic recovery process.
"There has been good progress towards easing of bottlenecks related to clearances of projects. Among others, the auctions for coal blocks and telecom spectrum allocation are key positive developments in this direction," he said.
"The second set of actions was related to a clear articulation of policy to set right the investment climate in the country. Efforts have been made not only to resolve existing issues but also to ensure that a well-defined policy approach is articulated for areas where ambiguity in the past has discouraged investor participation," Kamath said.
"In addition to auctioning of natural resources, gas pricing has also been rationalised. The opportunity provided by benign commodity prices has been well utilised for deregulating diesel prices."
Kamath further said that the Modi government has provided investors an assurance of a non-adversarial tax regime and greater foreign investment has been enabled in major areas like defence, railways and insurance.
Besides, a number of "positive steps" have been taken for structural improvements in the economy, where the goals are more long term in nature.
"The current account deficit continued to be contained, and the commitment to fiscal responsibility has been reaffirmed. Some steps for structural reform are being steadily put into place.
"... The long-term impact of these reforms will reap rich dividends for the country and its ability to achieve and sustain high rates of growth and enhance the well-being of its citizens," he said.
ICICI Bank, which was founded under Kamath's leadership in 1994, now commands an asset base of USD 100 billion, while the New Development Bank of BRICS nations will have initial authorised capital of USD 100 billion.
The 67-year-old banker, known among his friends as KV, began his career in 1971 at ICICI, the erstwhile financial institution that was incidentally set up at the initiative of another multi-lateral development institution, the World Bank.
ICICI Bank was later set up as a subsidiary of ICICI Ltd in 1994, while the parent later merged into it in 2002.
He led the group's transformation into a diversified, technology-driven financial services group that has leadership positions across banking, insurance and asset management in India and abroad.
He retired as Managing Director and CEO in April 2009, and became its non-executive Chairman.
A Padma Bhushan awardee, Kamath has always been a believer in the India growth story, including during the years of slower growth.
Recently too, when some industry leaders including another eminent banker Deepak Parekh, expressed dismay over delay in reforms, Kamath remained confident about deliverables of the new government. He went to the extent of chiding the industry leaders to first set their own houses in order by improving their balance sheets.
Friends, colleagues and other industry leaders have known Kamath as a man of 'big ideas and big numbers'.