Outlook Business: Is the market glossing over the challenges of implementing GST and the impact on the consumer?
Saluja: No. We don’t have all the answers right now. A lot of work is going on to see who is going to benefit and who is not. Maybe the branded MNCs will benefit the most, logistics costs could come down, and so forth. So, how it all transmits down to the bottom-line is something we will know once GST is implemented. But, for now, the intent of the government to push things through is what has created optimism in the market.
Saha: I think India is never going to see any policy that gets implemented in toto. So, a lot of dilution will happen before the final contours emerge. So, the moot point is that the customer is yet to comprehend how GST is going to change his life. But I think the impact wouldn’t be as harsh as one imagines, because there are always ways to mitigate the higher rates so that it won’t become a burden on consumers. I am hugely positive on GST implementation.
Das: I want to comment on the transmission of interest rates. Let’s look at it this way: a banker has Rs.100, he has to put Rs.4 in CRR, Rs.21 in SLR, and Rs.10 in regulatory capital cost. The balance is Rs.65. Of the Rs.65, 40% is reserved for priority sector lending. That means the banker now has Rs.39 left to lend. Now, how do you price that? So, transmission will take time but it will happen for sure.
Saluja: There is a market outside of banks such as CPs, etc. There is enough money available for anyone who has a good business. Even existing corporates can raise money through CPs and bring their overall costs down.
Mohan: At current rates, AA rated bonds can raise money with a 200 basis points premium. So, there is money that corporates can raise and banks are not necessarily the only option.