Exclusive | Kotak Bank’s Ashok Vaswani: Private sector capex needs to pick up to keep up economy growth

India’s economy is poised for continued growth, with projections of 7% to 8% in the coming years, according to Ashok Vaswani, MD and CEO of Kotak Mahindra Bank. That will require a significant increase in private sector capital expenditure (capex), which is crucial to reaching higher growth targets, Vaswani added.

“Unless there’s something which is completely out of the blue, it’s reasonable to expect the economy to continue to grow at 7%-7.5%-8%. It’s clearly a bright spot amongst the world economies. That kind of economic growth is great for financial services,” Ashok Vaswani, MD and CEO of Kotak Mahindra Bank told CNBC-TV18’s Shereen Bhan during an exclusive interview.

However, a key challenge that remains is the relatively slow pickup in private capex, which is critical for pushing the economy toward a higher growth range of 7% to 9%.

According to Vaswani, while the overall economic outlook remains positive, a stronger push in private capex is needed to fully capitalise on this growth momentum.

At present, the financial services sector continues to outpace GDP growth, expanding at 1.5x to 2x the national growth rate. However, this growth alone is not enough to drive the broader economy to its full potential.

Vaswani emphasises that private capex must increase significantly for GDP to reach the ambitious 9% mark.

“Has it started kicking in? Not as much as it should, so what does it take to really get that going is something I think we need to spend time talking about, thinking about, and doing something about,” he said.

Interest rates also play a pivotal role in shaping the trajectory of private investment. Although the Reserve Bank of India (RBI) has not provided a definitive timeline for rate cuts, economists at Kotak Mahindra expect a gradual reduction in rates in the coming months.

“The RBI has always managed this economy very, very well, and I think they will continue to do so. We, at least in-house, have an expectation that rates will come down gradually, starting maybe December. A 25 basis points cut is what our economists are predicting,” Vaswani tells CNBC-TV18.

This easing could create a more favorable environment for businesses to borrow and invest, potentially leading to an uptick in capex.

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