Read Desk. Veteran banker Uday Kotak has called for India to “solve the gold puzzle” as he looks to see a stronger economy in an increasingly weak global environment. With this he emphasized on maintaining the right balance between Brahma, Vishnu and Mahesh.
“We have to solve the gold problem,” said Uday Kotak, speaking at the ‘Developed India FinMin-States Conference’. He estimated that India's current account deficit (CAD) could be around $60 billion in FY 2027, while gold imports could reach $88-90 billion.
“We can have a current account surplus without gold imports; we need to solve the gold puzzle,” he said.
These comments come at a time when global gold prices have soared, increasing the value of India's gold import bill, even if the volume of imports has not increased in the same proportion. A sustained increase in imports may make it difficult for India to control its external deficit, especially if gold prices remain high.
'There is no scope for complacency'
Kotak said India has made considerable progress, but warned that recent economic gains should not be considered a reason to relax reforms. “We are doing great work, but we still have a long way to go,” he said. He said that India should think about 'Developed India' in the rapidly changing global scenario.
“There is no scope for complacency. This is not the time for us to declare victory. We need to be alert together because today's world is very fragile,” Kotak said. He also pointed to the scale of China's trade surplus and said global economic rules have changed and there are now “two superpowers” in the world.
“China's trade surplus is shocking,” he said.
Kotak also warned that technological changes are changing the balance between governments and businesses, and private companies are increasingly posing challenges to governments (sovereign entities).
He said powerful leaders globally are now discussing revenue sharing, which underlines the pressures facing governments in a changing economic landscape. Fiscal deficit and financialization need to be addressed
Kotak advocated for better fiscal discipline, saying that India needed to tighten its fiscal management despite pressure from states. “In a fiscal deficit situation of more than 7%, we need to exercise more strictness despite pressure from states,” he said. He also said that America is also preparing to control its fiscal deficit.
He also cautioned against excessive financialization of the Indian economy, as India is becoming increasingly dependent on market-based financing. “The market model poses a risk of excessive financialization of the Indian economy,” Kotak said. He stressed the need to be cautious about this trend.
Kotak said India's financing model also needs to change and the country should strengthen its position in terms of the goods and services that the rest of the world wants to buy from India.
“This is a challenge for us,” he said.
Seeing the current environment as an opportunity to make rapid reforms, Kotak reiterated “Never waste a crisis” and urged India to act quickly. He cited Canada's rapid reforms as an example of countries competing aggressively for global capital.
“As India, we need to do a lot quickly; as a country, we must not waste this crisis,” he said. He also advocated for stronger reforms at the state level and said India's development strategy needed a better balance between the Center and the states.
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