India’s next phase of growth will be technology driven: HDFC chief

The next phase of economic growth for India “rests on how it capitalises on technology,” according to Deepak Parekh, Chairman, HDFC.

Six of the 10 largest companies globally are technology companies. But there are large areas of concern that need to be addressed, such as quality of education and infrastructure, including online and telecommunications, he emphasised.

India became a trillion dollar economy in 2007, 60 years after Independence, doubled in size in seven years in 2015 and will more than double by 2024, but “there is no easy path to growing,” he said, addressing students at IIT Madras.

Financial services, e-commerce and mobile banking represent huge growth areas, he said.

“Increasing digital literacy in rural hinterland is key to further improvements. While demonetisation was a shot in the arm for a shift to online payments, this will be the next phase of growth and more radical changes are in the offing,” he added.

But the financial health of telecom companies, he said, is not encouraging.

India needs to gear up for 5G spectrum launch to power Internet of Things, artificial intelligence and e-governance, including healthcare delivery, agriculture services and transport systems. Internet here is the slowest in Asia, Parekh said.

In e-commerce, China delivers 57 million packages daily whereas in India it is a mere two million. Growth of this sector depends on logistics and warehousing infrastructure. Also, the financial model of these companies and valuations are “worrying”.

These companies need to generate cash profit to be self-sustaining. “Caution is needed on the cash burn model or some private equity will be left holding the baby,” Parekh said.

Significant reforms have been achieved in financial inclusion but “India has just scratched the surface,” he said.

Financial services companies and financial institutions need to work together. Also, priority has to be given to addressing the problem of bad loans, with public sector banks bearing the brunt.

Companies, Parekh said, have to give top priority to cyber security and financial regulators have to be ahead of the curve in technology.

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