In a candid interview with CNBC-TV18’s Udayan Mukherjee, Rakesh Jhunjhunwala, one of India’s most respected equity investors, said the Sensex could go up to 20,000 and then slip into a trading range between 15,000 and 16,000. The benchmark index won’t hit 21,000 in a straight run though, the Big Bull said.

“If the Nifty breaks 4650 decisively and holds for a week or so, it could hit 5900-6000,” Jhunjhunwala said. The markets would consolidate between 4,000-5,000 for three-four years, he added.

The correction seen in the latter part of 2008, he said, was a part of a major bull run that continues and which started in September 2001. “The bull market started in September 2001. We had the first leg up to September 2002 after which there was a correction. Then it started from April 2003, that leg lasted till 21,000,” the ace investor said. “That gets corrected back now to 7,500-8,000 and now we have resumed that bull market. So we can go to 20,000 and again come back to 16,000-15,000, make a range and then make a move which goes above 21,000.”

Here is a verbatim transcript of the exclusive interview with Rakesh Jhunjhunwala on CNBC-TV18. Also watch the accompanying video.

Q: We spoke on the day after the election results. I do not think even we imagined the market would be here. What is the screen telling you now?

A: The screen is telling me that the bear correction of the larger bull market in India is over. If the markets do not break below 4,000 levels in the next six-nine months — and the screen is telling us they won’t — then surely the fall from 6,000 to 2,500 for the Nifty and from 21,000 to 7,500-8,000 for the index was just a correction in the longer-term bull market in India. Actually, in my opinion, the correction started in September 2001 because the real bottom the market made was post-September 11, 2001 and then the market went up to 3,500 and had a historic correction back from April 2003.

Despite people’s apprehension and doubts about the economic scenario worldwide, it could be that the fall [in 2008] was just a correction. I also feel so because of the way the [subsequent] rise took place with its tremendous breadth, tremendous pace with good volumes — but with a lot of cynicism and lack of participation among the larger people.

Q: You do not agree with the consensus feeling right now that we should be scared by the pace of the rise. That we are now approaching a mini bubble kind of a situation?

A: You first asked what the screen was saying, you never asked me what my opinion was.

Just like others, there is a fair amount of doubt in my mind too. Internationally, things are not clear at all and I do not think that the downturn in the western economies — even if there is some kind of an improvement in the next 12-24 months — has really peaked. So with that knowledge about the world economy, it clouds the judgement of what can happen in India.

However, If you look at the other side of the story, I see no reason why — if Indian software exports grow by 10-15%, commodity prices hold at reasonable levels and we have good government policies — India cannot grow at double digits. We have large internal savings. If we do well, the world capital will be at our doorsteps, there will be no lack of capital if the government is able to facilitate investments. So those are the two sides but I am more tilted towards the second side because in the initial stages, they say, bull markets always go up on a wall of worry and bear markets always go down on a ray of hope.

The fact is that market is just going up in an unexpected pace and everybody is worrying. Surely I am also apprehensive about the valuation and the pace but markets are markets.

Q: When you look at the screen, what worries you? Does it worry you that valuations are far ahead of fundamentals or do you see the kind of participation or mania that you saw in 2007 or that is not visible just yet?

A: Not at all, not even 5%. I don’t go to any cocktail party where stock markets are even talked because everybody is totally left out. And the futures positions are indicative, the number of calls you get, the apprehension that people have in the buy stocks — I don’t know where the buyers are coming from but I don’t think there is even 20% of the participation of that what was in 2007.

Q: Will they all get sucked in you think before this rally tops out, people who have been sitting out?

A: It is very difficult to leave a burning cigarette in a rising market. Everybody will ultimately join. I don’t know how many calls I got when we made a 52-week high. Normally, a lot of channels call me, no channel called me to get an opinion when the market was at a 52-week high. I don’t even know how many people know we were at a 52-week high.

So I think crowd psychology-wise or sentiment-wise, I don’t think at all we are anywhere near any kind of a top.

Q: Are you trading yourself with a bit more caution because you were saying you are also in two minds righ

Q: Why did you pick out the level 4,000? Any significance or do you think below that…

A: Instead of 4,000, I would say 3,800 or maybe even 3,600 — no level is sacrosanct — but I would say the level where this market made a gap, that should not be violated on the downside. If it breaks 4,650 decisively, that’s what my technical analyst tells me, that market will make or at least challenge the previous high of 6,100.

Q: Do you think 6,100 is possible in 2009?

A: Did you think 4,500 was possible?

Q: I am asking you.

A: Ok. What the technical analyst says — and I also think — if it breaks 4,650 decisively on a weekly basis and holds it for a week or two, then surely we can go to 5,800-5,900-6,000 levels. We could go there, then come back to 5,000-5,200 or maybe 4,800-4,500, make a range and consolidate for a year or so and then make a new high. Another scenario: we break 4,650, we are going to go to 5,850-5,900-6,000, come back to somewhere around 3,300-3,400 and maybe spend three-four years there.

Q: Do you think that’s also possible — that the market goes there, halves from there and then spends a big…

A: It happened in 1991. So at this moment, I won’t rule out any of the scenarios but I am more inclined towards the first that we will reach 5,800-5900-6000 and then we consolidate — maybe in the 4,500-5,000 or 4,600-5,200 or even 4,000-5,000 range for the next 12-18 months. Then we go into a new high — 6,100 — and go upwards or we go back to 3,000 to 4,000 where we spend two-three years to resume higher.

Q: What is your best guess for the rest of 2009? Do you think we will actually go to 5,800-5,900 in 2009?

A: I have put a lot of caveats there — that the index should cross 4,650 decisively on a weekly basis, hold for a week or two, then I think it should. I don’t know where and what range the markets go into, but they will go into a range, spend time and only then are we going to see a big move. We have already seen a big move, we don’t know whether this move will end at: 4,800, 5,800, 5,900, 6,000? I think it will surely end before 6,000.

I do not think the Sensex will cross 21,000 in a straight line. We have to correct and we have to make a range and only then we can have the next move.

Q: Range in terms of price or time?

A: Price.

Q: And that range according to you is?

A: Who knows where it will be.

Q: What is your best case?

A: I think it will be anywhere between 3,800 and 5,000.

Q: That big a range?

A: The range could be narrower but 3,800 would be the bottom and 5,000 would be the top in that range. The range could be 4,000 to 4,500, it could be 4,500 to 5,000.

Q: After that you think a bigger bull market will commence, which goes to a new high?

A: The bull market, which has started in September 2001. We had a bull market up to 2008, we had the first leg up to September 2002 after which there was a correction. Then it started from April 2003, that leg lasted till 21,000.

That gets corrected back now to 7,500-8,000 and now we have resumed that bull market. So we can go to 20,000 and again come back to 16,000-15,000, make a range and then make a move which goes above 21,000.

Q: Right now what sums up your state of mind: wildly optimistic, terribly and totally bullish or cautiously bullish?

A: All three.

Q: With an accent on what, the caution or the bullishness?

A: I am cautious.

Q: Why? You said yourself that nobody is participated; the gaon is not into stocks.

A: I am also part of the gaon.

Q: You are a sophisticated member of the gaon.

A: Even the sophisticated ones are caught.

Q: What is making you cautious? You said valuations are not crazy and who are we to say valuations are excessive? Is it global cues which you think may turn?

A: Yes, it is the sheer psychology of the fact that the global economy is in a terrible downturn. That is put into our brains.

Q: It is not the experience of the horrific 2008?

A: No, not all that. We have had more horrific experiences.

Q: Have you? 60% down in one year?

A: Yes, why not? ‘92, though I made a lot of money back then by shorting but we also 2000, which was the worst year when from 6,000, you came back to 2,900.

Q: So the fear is global, nothing else?

A: Yes, the fear is global.

Q: There has been so much talk about how much of the next move will be led by policy initiatives, Budget, government formation etc. do you think the Budget is that big an event?

A: No, I don’t think so. Market is a constraint of so many ingredients. Therefore it is not that a single ingredient by itself is going to be the decider. I don’t think the Budget is very important from the longer-term point of view. Surely it is important because it is the first serious policy statement of the new government. But I think people distinguish the policies of government from the apparent policies and the unapparent policies; apparent reforms and unapparent reforms. I think for longer-term unapparent reforms are very important.

Today I read in the Financial Express that now they will put all the applications for environmental clearance on the net. There is going to be transparency. If you do that and if you have proper land acquisition laws, so much investment will get speeded up into this country which is far more important than any statement that Finance Minister (FM) makes or even the allocation of 20,000 crore for infrastructure spending. I think this change is worth 2 lakh crore. So I think these are the unapparent reforms which are not in your mind but they have a slow effect; where you computerize things wherever the bureaucracy is dealing with the citizens, agriculture, study of subsidies, removal of anarchic clause. These are the reforms which - Indian Telegraph Law which has been in existence in 1885 and today is 2009, a modern company law. I think so many other factors are there, policy initiatives in agriculture where you look upon agriculture as a business and where we can make these businesses profitable for the farmer, the occupation. So I think unapparent reforms are extremely important.

Q: Is the market as discerning as to understand the value of those kind of reforms that you speak about?

A: I think so. Over a period of time all long-term investors will.

Q: What is the market pricing in in your eyes from the Budget this time around?

A: Maybe it is pricing out a lot of the disillusion or the alarm or the sheer fright of what could happen in the world economically then commodity prices have picked up that has bee priced in. I think also people are expecting dollar weakness that is reading to money in emerging markets. I think there is some paint-up demand and I think there is a lot of selling in panic. Mr Ramesh Damani’s father used to say, “In a bull phase, shares zameen mein chale jaate hai aur bear phase mein zameen se aajate hai.” So the buyer is there, he is invisible, we don’t know who he is and I don’t think that all the qualified institutional placements (QIPs) will go through and I don’t think that QIPs are ultimately going to lead to sensible money being lifted out of the markets.

Q: You don’t think all the real estate companies will manage to raise how much they want to raise?

A: I don’t know about the real estate companies or infrastructure companies or whatever companies. I don’t think that all the QIPs that have come out for money, are going to go through despite wherever the market is.

Q: How would the market take that if some of those QIPs bombed?

A: Fair enough. I would be happy. I have 20,000 market cap I want to raise Rs 5,000 crore. You haven’t earned Rs 2,000 crore in your life, you want to raise Rs 5,000 crore. The cumulative profit in life is not exceeded Rs 2,000 crore.

Q: Do you think there will be any tweak with the general capital markets taxation structure in this Budget, long-term capital, short-term capital or even STT for traders is likely in your eyes?

A: I don’t think that STT is entirely unjustified tax. I think the fair thing – I don’t think to reduce the rate marginally, bring it to more reasonable levels and to allow people who are not investors but business traders to allow that as an advance tax payment. I think that is the more fair thing. I don’t demand evolution of STT.

Q: But no change in the capital gains tax structure?

A: That is linked to STT. You impose the STT as an alternative to the capital gains which is a far better and an easier system then you make the rate reasonable for STT, continue it and allow the people who treat it as business income to treat it as an advance tax payment and make that system. So that when a person initiates that trade, he can say whether it is a capital gain trade or it is a business trade and you cannot change it, one entity can have only one or if he does it, he has to specify before that takes place.

Q: You track Indian Oil etc for a long time though you don’t own them; do you think there will be change in the policy this time around or unlikely?

A: My personal judgement is it is unlikely.

Q: Why do you say that?

A: Because it will require immediate raise in prices of petrol and diesel and no government wants to give a message in its first three months of power but they may change it. If I was there to decide, I would do it tomorrow because we never realize one thing, whether I pay and you pay, it is the government of India pays and I think this kerosene subject is incredulous I don’t know who is using this kerosene and we are entitled to all of this. So at least they should reduce - all of these subsidies should be below the poverty line. I think petrol pricing - at least they should free it, why do you want a control on petrol prices.

Q: But you are saying even that he may not do?

A: He may do that, there must be some tweaking, he may do that – I think petrol and Liquefied Petroleum Gas (LPG) should be decontrolled immediately. Liquefied Petroleum Gas (LGP) all are using it. I think for diesel – they can offer a subsidiary of Rs 1-3/liter and for kerosene – I don’t think they will do it but if I were to decide to raise it tomorrow, it should be done today.
Q: You know he won’t do it?
A: We don’t know.

Q: Do you think the optimism post the electoral result is justified on infrastructure sector?

A: Over a period of time surely the optimism is justified and I am an interested party. Similarly there will be tremendous build up in Indian infrastructure - you cannot have the companies tomorrow which can build this infrastructure because there is prequalification, there is experience, capital requirement lot of barriers and volumes will surely give them very good profitability. And also a lot of Chinese companies and all come to India, they complete failed. I am told that Indian companies are doing well internationally also. So I don’t think this performance was unjustified.
Q: Do you think valuations today are also pricing in too much of optimism for infrastructure?

A: I don’t think so because some of them were beaten very badly. Largecaps like Larsen & Toubro (L&T) and all have fancy valuations but the other stocks were beaten up very badly. Nagarjuna Constructions has gone from Rs 375 to Rs 38.

Q: Quadrupled from there or trebled?

A: I still think it is 1/3rd from Rs 375.

Q: Is that the right way to look at the sector?

A: It is not the right way but it is also not the right way to look at it from Rs 38.

Q: In absolute terms do you think valuations are run ahead of fundamentals or they justify current price?

A: Who knows who justifies value and valuation? Is there any mathematics professor who can give me a formula that this is the right valuation? I don’t want to comment on the valuation of any sector. If you feel so, don’t invest.

Q: What about real estate? You have not been very bullish on that space, has that view changed over the last six months or so?

A: I am not bullish.

Q: Why do you not like the sector at all, they have started cutting the prices, balance sheets have been repaired?

A: Because even if they have to sell all their projects at their projected prices, the current market caps and the debt more than justify it and the present land prices cannot replace that. I am a real estate company, I have 10,000 acres of land acquired twenty years ago, then to bring into my valuation, I am selling 2,000 acres every year, you priced it in. Acquire that 10,000 acres land again at the same price and show me.

This is not Hong Kong where government is giving land every year 500 acres, 200 acres. I have no investment in real estate space and it is too volatile also.
Continued on next page ...

Q: Are you generally worried about where valuations have reached or you think that is not necessarily the case at this point?

A: In midcaps the valuations are still not anything which is a whack out of the world and we cannot look at valuation isolation – when I initially came into the markets, if the price to book was very high, I was worried - for example a company like Hindustan Lever. But the fact is that I have seen so many studies when return on equity (RoEs) are high, price to book is very high. So I just cannot look at this company has 20 P/E and it is very expensive this company has 8 P/E and it is not expensive.

Q: But the fact that so many companies are rushing in to raise capital, does it worry you?

A: But a lot of them are on the verge of bankruptcy. They have no option and of course there are some good ones – if you had gone to some of the companies, for example if the company’s price was Rs 250 at 2007, they wanted Rs 375. Now if the price is Rs 90, it would be at Rs 85. So they are doing it because they don’t have choice and some are having old habits, money is available, take it, ambitions have no limits.

Budget ’09: CII calls for tax sops, rise in infra spending

Published on Fri, Jun 26, 2009 at 20:02 , Updated at Sat, Jun 27, 2009 at 12:19
Source : CNBC-TV18

A decisive election result has spurred hopes for a kick-start to the development of India’s notoriously poised infrastructure. Indian infrastructure investment equaled about 6% of the gross domestic product (GDP) last year compared with 8.5% in China. Also, hopes are high that the Budget to be unveiled on July 6 will include commitments to speed up infrastructure development from the rationalisation of taxes, to the tax intensive for infrastructure funding for the next 10 years, to the removal of minimum alternate tax (MAT), to rationalisation of indirect tax benefits—India Inc has a long wish list.

Exclusively on CNBC-TV18, Vinayak Chatterjee, Chairman, CII National Council on Infrastructure and Chairman, Feedback Ventures, Athar Shahab, Chairman, CII Core Group on Roads and Deputy MD, IDFC Projects, and Rajeev Jain, Chairman, CII Core Group on Airports and President and CEO, Mumbai International Airport, discuss how imperative is infrastructure in the forthcoming Budget.

Vinayak Chatterjee, Chairman, CII National Council on Infrastructure and Chairman, Feedback Ventures, said CII’s wish list is divided into three baskets. “The Budget for infrastructure is fundamentally at interplay between these three baskets—taxation, financial markets and direction setting,” he said.

However, he added, “One is getting feelers from the ground that revenue considerations and potential loss of revenue will not allow the government to actually give some tax concessions or benefits that might lead to potential loss of revenues, although they may agree that it is logical to do so.”

However, Athar Shahab, Chairman, CII Core Group on Roads and Deputy MD, IDFC Projects, was a little more hopeful on this count. “The multiplier effect of infrastructure is very obvious and we are seeing that in sectors like telecom, where there is work, everybody knows that if one can give a similar kick-start to industries like power and roads and so on, the whole economy would benefit tremendously. Therefore, rather than looking at a very narrow perspective of today’s revenue collection in this year or the year after this, probably is not the right way and I think there is a school of thought that believes that some kind of impetus may be necessary,” he said.

Commenting on the rationalisation of section 88 IA and removal of MAT for infra, Rajeev Jain, Chairman, CII Core Group on Airports and President and CEO, Mumbai International Airport, said, “88 IA is a section where sunset clause has already set in on so many industries and only two to three industries are there which are now eligible for 88 IA and MAT is not gelling with that. You are exempted under 88 IA but you have to pay MAT. I am hoping that some correction should come in 88 IA. We are quite hopeful that MAT should be abolished at least for infrastructure projects—10 (23G) also—something like that should come in this Budget.”

Here is a verbatim transcript of the exclusive interview with Vinayak Chatterjee, Athar Shahab and Rajeev Jain on CNBC-TV18. Also watch the accompanying video.

Q: Let me start by asking you—every year we put this question to all of you on the panels like this and the question this time around is that there is so much expectation, given the fact that you have got a decisive election result and the hope really is that infrastructure is going to be given top priority. How hopeful are you this time around and how different are you feeling from last year?

Chatterjee: Not too different from last year because even at this time last year, or Budget time last year, quite honestly the hopes and expectations on infrastructure were equally high as they are this time. But to go straight to chase and you have CII’s long wish list with you which is many pages. I think the idea really is to segregate them into some manageable baskets and I think this time I am going to segregate them into three baskets. Basket one relates to all the issues relating to taxation and you read out a few of them. Basket two are issues that impact financial market or make getting finance for infrastructure projects easier or more difficult, nothing to do with taxation but a series of measures. Basket three is to do with what one broadly calls direction setting—announcement of new plans and programmes like Bharat Nirman etc.

Now the Budget for infrastructure is fundamentally at interplay between these three baskets—taxation, financial markets and direction setting.

Q: So which basket do you actually think will find its way into the Budget? How hopeful are you that actually the tax incentives part or the tax bucket of it will form a large chunk of the Budget this year for you?

Chatterjee: Hope and expectation from the infrastructure sector is that it will be impactful but one is also getting feelers from the ground that revenue considerations and potential loss of revenue will not allow the government to actually give some tax concessions or benefits that might lead to potential loss of revenues although they may agree that it is logical to do so. So therefore the expectation is a little tempered on that count.

Q: Would you agree with that, that revenue neutral policies are probably going to find their way into this Budget—so don’t really expect great tax sops, don’t really expect great tax concessions—is that the hope that your picking up as well at this point?

Shahab: I would say I am a little more hopeful than Chatterjee is.

Q: What`s the reason behind that optimism?

Shahab: The multiplier effect of infrastructure is very obvious and we are seeing that in sectors where there is work like telecom and everybody knows that if one can give a similar kick start to industries like power and roads and so on, the whole economy would benefit tremendously and therefore rather than looking at a very narrow perspective of today’s revenue collection in this year or the year after this, probably is not the right way and I think there is a school of thought that believes that some kind of impetus may be necessary.

Q: Let us look at the look at the long list that CII has put up in terms of recommendations that are on the tax front. Rationalisation of section 88 IA, extension for another 10-years, provision of tax incentives for infra funding for the next 10-years like 10 (23G) and removal of MAT for infra for the next 10 years. How much of this do actually see getting done this Budget?

Shahab: If you see 88 IA and MAT – they just gel together – they are contrary to each other and industries has been saying for a long time, please these don’t go together. If you want to encourage infrastructure do away with MAT. And we believe that this time around the government would listen. 10(23G) when it was introduced it was a great incentive to infrastructure financing – various reasons the government decided to withdraw this. Bring something like that back into infrastructure, it gives a kick start – it sends the right signal. Then the whole casketing impact of dividend distribution tax – infrastructure investment routed through multilayered vehicles. You cannot afford to have tax leakages at each layer, so things like that. If the government is sensitive, if they really want to push – these are very important signals. May be short-term view could be a little bit of revenue leakage but the long-term view is very positive.

Q: Do you actually see them biting the bullet in the short-term even if it means taking on a revenue hit? Do you actually see them correcting the anomalies—the long standing demand of industry on issues like MAT for instance?

Jain: Yes I agree with Shahab. I think 88 IA is a section where sunset clause has already set in on so many industries and only 2-3 industries are there which are now eligible for 88 IA and MAT is not gelling with that. You are exempted under 88 IA but you have to pay MAT. I am hoping that some correction should come in 88 IA. We are quite hopeful that MAT should be abolished at least for infrastructure projects – 10 (23G) also – something like that should come in this Budget.

Q: Outside of incentives for infra funding. We had the Deepak Parekh Committee on infrastructure funding that had come out with several recommendations including using foreign exchange reserves. Of course not many of those have actually found their way into policy prescription. In terms of big ideas, in terms of innovative ideas, do you actually expect anything to boost infra funding?

Chatterjee: I think the second basket is more global than the first. Although as they have said, all the demands of basket 1 are extremely logical, but anyway you are now asking a basket 2 question, which is policies that impact the financial markets.

One of them is to actually broad base Indian infrastructure finance companies’ ability to lend far beyond what it is mandated to do today. That is number one.

Second is, to treat infrastructure NBFCs as a special category. Third is to actually make infrastructure priority sector lending for commercial banks and make it a little easier for them because there are many constraints that operate simultaneously in commercial banks to make them easier.

So, these are three thoughts for example that could impact financial markets. But as you rightly said, whether it is the Deepak Parekh Committee report, whether it is the Percy Mistry report or the Raghuram Rajan report, all of them have many thoughts to deepen and broaden infrastructure.

Q: Revenue-neutral in that sense. So, are you actually expecting these to be more doable given the fiscal constraints at this point?

Shahab: Certainly. I would reckon the government would find it much easier to pursue some of these initiatives. There are a whole bunch of recommendations pending with the government. Right now, if we just look at IIFCL, a very key intermediary in the infrastructure market, there is a lot that it can do. The market desperately needs structured products, it needs take-out financing, it needs long-term money. All that can be done through intermediaries like IIFCL.

Q: There is talk of a road finance corporation (RFC). Kamal Nath has actually gone on record to outline the role that this organisation could possibly play. How much would you bet on something like the road finance corporation to spur development?

Shahab: We believe that a well-structured intermediary can play a very important role. Infrastructure requires long-term financing. Look at the debt providers in the infrastructure sector. You really do not have long-term debt capital in this country. If that is the gap that this RFC can fulfill and I think the minister is thinking in the right direction, then it can make a very strong catalytic impact.

Q: What are your thoughts on that? The figure was about USD 500 billion, which is the sort of investments that are required to be pumped into the infrastructure sector as part of the Eleventh Five Year Plan. At this point, given the fact that we are seeing a global economic downturn, how do you actually address the investment deficit?

Jain: I think one is in business market where it is planned; long-term finances are available at affordable rate of interest. Also, there has to be some special thing to be done for the ECBs (External Commercial Borrowing) for infrastructure. Some tax breaks to individuals may also be given like covering it under Section 80C so that they can invest in bonds and other things. That should also give a fillip.

As far as airports are concerned, a lot of investment comes in airport sector. They should clear the perception of what can be done in an airport. They are talking of developing 35 airports for the last two or three years. But there is no clarity that what type of development will take place. There are restrictions under AT Act, what you can do and what you cannot. There has to be a will power to correct that and make it a viable proposition. I think funding will be pouring in.

Q: We have had this discussion before as well. This was the hope and the expectation that the ECB curb would actually be relaxed now that you have actually seen inflation in negative zone and you are in need of funds. It only happened for integrated townships. Are you hopeful that this cap will be further relaxed?

Chatterjee: From what I understand in terms of interactions with friends in the government who decide policies of this nature, I believe that there has still not been great convergence on allowing unrestricted foreign capital to come in into the infrastructure sector. So, while the need is clearly there, the demand is there and there is money waiting to come in. I think on a net balance of various macroeconomic considerations the government is still in a conservative mode on allowing large doses of ECB coming in. But those are macroeconomic issues.

Q: Would you expect the Finance Minister to perhaps even address this issue at all?

Shahab: I would strongly think that he should. If you just do the math, it is very clear that the domestic financing system would not be able to meet the entire requirements of the financial sector and the infrastructure sector. It means that you have to bring in capital from outside. The current ECB guidelines are fairly restrictive; there are all kinds of ceilings and caps which won’t work.

So, if you are really serious, and if you really want to lay out that plan and make it work, you have to have a rethink on ECBs, especially for infrastructure.

Q: I was talking about the flagship schemes of the government that are infrastructure related, for instance the JNNURM, there are hopes that this time around we are going to see more budgetary allocation as far as this particular scheme is concerned and big hopes on rural as well as urban low cost housing, what are you actually picking up and how hopeful are you?

Chatterjee: Urban low cost housing is certainly expected as a new big push. I think funding of existing flagship products and extending them is also very much on the cards. But the real issue is and it came through during the elections is that citizens of India the public at large are quite tired of hearing another round of budgetary outlays for 20 different things. When year after year, we have been getting negative feedback and the UPA government received quite a bit of negative flack on their core implementation and delivery record including CAG audits on NREGA and various other schemes. So the political system and the UPA too as its called now is very much on the back foot, whenever questions of effectiveness, efficiency or delivery is concerned. So I am expecting in this budget a major announcement that will try and address this concern which is snowballing by the day saying that don’t just tell us about outlays because even Chidambaram’s promise of an outcomes budget has fallen by the wayside.

Q: So are you talking about a monitoring agency, a regulator?

Chatterjee: We are talking about a very powerful monitoring agency attached to the PMO that will answer to the nation atleast once a quarter like the statistics are put out on the manufacturing growth, GDP and inflation. We are expecting a monitoring authority on infrastructure that will monitor the efficacy and the effectiveness of public expenditure rather than talking about outlays. It’s a big expectation from the budget.

Q: Are you expecting this as well?

Shahab: I am and we are a part of the same initiative at CII and it is working with the government towards its objective. As Vinayak just pointed out the whole outcome, input versus output debate has to consume a lot of hours. But nothing seems to come out of it and that’s a bit change that we are seeing this time around. This time the new government and a lot of these infrastructure ministers have been very focused on outcome and output, so we really want to see that now being converted into an action plan.

Q: So hopefully we will see a monitoring agency come into being and that announcement is likely as we are picking up now in the budget, but you were talking about the lack of will power and lack fo clarity as far as the airport sector was concerned with regards to the development of the airports, take us through what you would actually like to see because the Civil Aviation Minister has gone on record to say, green field, brown field, this is the role of the private players, or the Airports Authority of India, what exactly the clarity would you actually like to see?

Jain: I will give an example of these 35 non-metro airports, this is going on for last three years and there is no clarity exactly what needs to be done. Similarly once we talk that some airports will be developed by under PPP, all of a sudden, a decision is being taken that it will be AI who will be developing these projects. You see Navi Mumbai project in Mumbai, it is going on for the last so many years. Every day you read something which says that, it is coming, it is not coming, the clearance has not been given and that matter is still between the Civil Aviation ministry and the state government and that is delaying the whole thing. So that implementation has to be there and there has to be co-ordination between all the agencies. The state government is saying we have got all the clearances, high court has cleared it, notification is being issued for exclusion but all of a sudden there is a letter from as per press that minister says it should come at some other place and then again the state government taking it up. So this is delaying the whole implementation of the project. So that clarity and fast implementation is what is required.

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