‘Prepare for worst’: Uday Kotak warns India of West Asia oil shock risks

Amid the ongoing tensions in West Asia, Business tycoon and founder of Kotak Mahindra Bank, Uday Kotak raised concerns about a possible financial shock for Indians triggered by rising energy prices.

Speaking at a Confederation of Indian Industry (CII) event, the finance industry veteran also said that India needs to reduce its dependence on foreign capital and focus on building a strong domestic pool of long-term risk capital to achieve true economic self-reliance.

Kotak observed that fuel prices for ordinary consumers have not yet been majorly affected by the conflict between US,Israel and Iran which has been taking place over the past two months. "But we must prepare for the worst. It's about preparation, be ready for tough times rather than wait for the shock to hit us," said Kotak.

He said the global environment is becoming increasingly fragmented, with countries prioritising their own strategic interests, making it imperative for India to strengthen its domestic economic foundations.

Calling it a "provocative" statement for a finance professional, Kotak said, "India has financialized too early."

He said many companies have become excessively focused on quarterly earnings, stock prices and employee stock option gains, instead of building businesses with a three-to-five-year perspective.

"I would strongly urge companies to not be excessively focused on the short-term stock price... but think about building a company three to five years," he said.

Kotak said India had relied heavily on foreign portfolio investment (FPIs) for many years and only after the pandemic did domestic investors begin to play a larger role in capital markets.

He urged companies to reinvest profits rather than simply managing large treasury portfolios.

"Corporate India has got a phenomenal tax rate. What have you done with it? Are we reinvesting or running corporate treasuries?" he asked.

Kotak said governments are generally poor allocators of capital and suggested that policy support should focus on encouraging fresh investments through additional investment allowances rather than relying solely on existing tax incentives.

He also stressed the need for India to strengthen its economic "balance sheet and P&L" by boosting domestic production, increasing exports and reducing import dependence.

With PTI inputs