India has to choose between US, China tech systems: Uday Kotak

Kotak Mahindra Bank chief Uday Kotak said on Friday that India will have to choose between Western tech systems and Chinese ones in the next two years. The veteran banker said a lot would be riding on 5G technology. The decision would depend on how the rest of the world deals with the two systems, Kotak said in response to a query on emergence of technology in the financial sector at an event in Pune.

India has a tough choice to make, keeping in mind economic and political alignments which could change in the future, he added. The proposition that the Chinese 5G brings is that it is cheaper and important for India’s competitiveness, according to the banker. “We will have to find a way to have good relationship with China for our competitiveness”, he said.

Kotak was speaking at the Asia Economic Dialogue on Asia and the Emerging International Trading System organised by the Ministry of External Affairs and the Pune International Centre. He said India is at the cusp of making serious choices in the financial sector. The banker said India needs to ask if the move to nationalise banks in 1969 — which put taxpayer money into state-owned banks, has been giving returns to taxpayers.

He spoke in favour of a 6:3:3 formula where only six large public sector banks would remain, three would be publicly-owned but below 50% and with a broadbased ownership, and three slots for out of the box transparent
PPP banks. This would increase the competitiveness and quality of India’s banks, Kotak said.

A similar consolidation is happening in every sector in the country where Darwin’s survival of the fittest theory is at work, he suggested. “Telecom is down from 13 players to three, wind energy sector is down from 19 players to three. Sector after sector has seen consolidation but though not through combination,” he said. Kotak expects consolidation in the financial and real estate sectors to continue.

On the cost of capital in the country, Kotak said real interest rates are finally beginning to come down and cited how central banks across the world have erred in over-estimating inflation. Kotak said that in a post-Brexit scenario, London could become an alternative financial centre for Asia.

He said India needs to make it worthwhile for people to take risks. A lot of domestic savings are risk averse and there is a need to fix governance systems in the country and restore confidence so that savers invest in the market, the banker said.