‘There’s money offshore waiting to come to India. They want a reason to invest...the Budget hasn’t given them that reason’


In this Idea Exchange, Naina Lal Kidwai, Group General Manager and Country Head, HSBC India, speaks about the investment climate in the country, the stress on real-economy sectors and the need for a quota for women in boardrooms. This session was moderated by Deputy Editor P Vaidyanathan Iyer

P VAIDYANATHAN IYER: A day before the Budget, the Economic Survey cautioned about the corporate sector going in for more ECBs (External Commercial Borrowings). But in the Budget, the Finance Minister encouraged ECBs for some sectors. Do you think the increasing reliance on ECBs is an issue?

Naina Lal Kidwai: The fact is, we also need our corporate sector to grow. We do not have a vibrant corporate bond market in India and it's a very big issue. It's not one that is resolved easily because there are many issuers, but the problem is more that we do not have enough investors, namely, insurance companies, pension funds, long-term investors. There are many structural weaknesses, particularly in terms of corporate bonds falling under different regulators that have just not been able to move this forward. It is important to recognise that backdrop because if you are a company wanting to raise debt, then the only recourse you have is to bank loans or ECBs. Now ECBs are the preserve really of the big corporates and I think it is a healthy aspect. At least they can go out and borrow at cheap rates. That does not crowd out the small guys here. So you don't have the debt market and I think we don't have a banking sector that is going as fast as the industry requires. It is just as well that we can allow our large corporates to go out and borrow and bring that money back in for investment here. So all in all, ECBs have a very important place.

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