The Hindu Business Line : `Feel-good factor is for real'

NO year in recent history has ended and another begun at such a rich note as this. Year 2003 has ended with a GDP growth of over six per cent in the last quarter, foreign exchange reserves of over $100 billion, a balance of payment surplus that has doubled on-year and a feel-good factor that can hardly be captured in numbers.

Though purists would see the gaping fiscal deficit, trade deficit and such other jarring notes, two gentlemen who have been playing with this symphony say the feel-good factor is for real.

Mr M. Damodaran

Says Mr M. Damodaran, who heads IDBI — the country's largest development financial institution, and UTI MF — the largest mutual fund, and the specified undertaking of UTI, "The feel-good factor is real. No doubt about it, and it will be felt more widely. And it is sustainable, but we have to work on it. Do not expect it to prevail automatically for ever."

So it is, agrees Mr A.K. Purwar, Chairman of State Bank of India, India's largest commercial bank with group assets of nearly Rs 5 lakh crore.

Mr A.K. Purwar

"The feel-good factor is certainly realistic. Medium term growth rate of over six per cent plus is sustainable," Mr Purwar said.

Between them, Mr Damodaran and Mr Purwar manage nearly a third of the country's financial system. Being at the helm of SBI, Mr Purwar is often the trendsetter of banking initiatives and has his ear to the pulse of the economy. "I feel growth will be better in 2004. What we need is investments in infrastructure and agriculture," he said.

The banker, who cut his prime lending rate a couple of days ago to 10.25 per cent, added that interest rates are likely to remain stable in the near term.

Mr Damodaran has guided UTI through a storm that threatened its very existence and has set it sailing full steam. He is currently overseeing the transition of IDBI into a giant universal bank, one that is likely to emerge as a rival to SBI.

"It is a good time for consolidation in the financial sector. The environment is favourable. Weaker entities should merge with stronger ones. There is no room for several players in a highly competitive environment," Mr Damodaran says.

"The positive side of the current economic recovery is that it is broad-based; unlike in the past when one or two buoyant sectors will be covering up for the others," he added.

A part of the credit for UTI's turnaround also goes to the equity market; and Mr Damodaran is a firm believer that given time, the stock market is a great healer.

"I am personally always bullish on the stock market as my Zodiac sign is Taurus (the bull). I am bullish on the economy. And the stock market is a reflection of the economy. The year 2004 would be better than 2003 for India and the world," he said.