‘Major shock coming through oil price rise’

NE DELHI: Banker Uday Kotak on Tuesday cautioned that there is a “major shock” coming through an increase in oil prices, while calling for lowering the dependence on foreign capital.

“In last two months, we have not seen impact of the Middle East (West Asia) war in terms of energy price transition, it’s coming and it’s coming big. Consumers have not felt the pressure at all. Think about a consumer with limited income to spend directly on fuel and indirectly on other items. The shock is coming, we had old inventory, we had the ability for oil companies to be the shock absorber. It’s a large amount of money and you are not far away from a shock, unless the Iran war stops tomorrow morning,” he said at the CII annual meeting.The comments come amid rising expectations of a fuel price increase in the coming days due to heavy under-recovery by oil retailers.

The Kotak Mahindra Bank founder and director 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. He said a genuinely self-reliant country is the one that “does not need to depend on somebody else’s money or power” and referred to PM Narendra Modi’s call to avoid destination weddings overseas and hold them in India.

Kotak said, “India has financialised 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 not to be excessively focused on short-term stock price... but think about building a company for three to five years.”

Kotak said India had relied heavily on foreign portfolio investments for many years and domestic investors started to play a larger role in capital markets only after the pandemic. The veteran banker also advocated strengthening the country’s domestic private equity, venture capital and alternative asset ecosystem, saying these institutions are essential for funding entrepreneurship and long-term economic growth.

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