Deepak Parekh, Chairman HDFC Group, highlighted some of the key challenges faced by India. Excerpts as follows,
Inflation supply-side is a problem; investment in agriculture is important; productivity is required to increase; APMC is outdated; logistics and modern retailing is one short-term measure; a farmer gets only Rs33 out of the Rs100 paid by a consumer against Rs66 in developed countries.
US$100/bbl and higher crude price—FY2011E imports bill could be as high as US$100 bn; for 9MFY11, it was US$75/bbl.
Infrastructure government spent 7.5% of GDP in FY2010; land acquisition is a big issue; 40% of delays in a project happens due to land acquisition problems; Land Acquisition Amendment bill is pending in the parliament.
Liquidity—liquidity is structurally short in the country; government expenditure is not picking up in the short term and creating some degree of tightness in the economy; this is resulting in higher interest rates; however, higher interest rates will lead to a pick-up in deposits with one-year deposit rate going up to 10% or more.
Governance is an issue but there are some signs of improvement—several steps being taken in states; chief minister of Maharashtra has put certain guidelines for real estate sector (he is not going to meet any builder individually) and has promoted young officers
with integrity); Gujarat is doing the right things in execution and implementation; other states are following suit; the central government has to sit up and take notice.