Budget Should Focus on Growth and Cutting Deficits: Anshu Jain

NDTV's Dr Prannoy Roy spoke to one of the biggest names in international banking, Anshu Jain, the co-chief executive officer of Deutsche Bank. He said that India needs to create a million jobs every month just to stay where it is. (Watch)

Here is an edited transcript of the interview.

How long is it going to take Europe to get out of the current problem ?

Let's face the fact that Europe has come a long way. Two years ago we were talking about the disillusion of the European Union, collapse of the euro. The ECB and European governments have done a lot to stabilise the Europe. Your question has to do with when will Europe start growing again.

The problem that Mario Draghi is now fighting is of very low inflation expectations; in fact the word deflation is now being used as well. The ECB targets 2 per cent inflation, we are running somewhere at half a per cent and that is an issue. The moves which ECB has announced are very significant. 1.2 trillion euros in quantitative easing or done through bond buying,record low interest rates. It's a powerful package.

The impact of the US engine going much faster now and perhaps Europe is getting much better. How will that impact India?

For the global system the US locomotive picking up steam is good news. The US is a net importer so I think that will be positive. Europe going back above one per cent would be good as well. All comes down to the model India choses and the choices that are made. If you go into heart of the 'Made in India' program, it has now been lost. Yes that signals an export tilt. All else being equal, global demand picking up again should be a good thing.

Are low oil prices bad for the world? Some countries are going to lose out and some are going to gain by fall in oil prices. So is it a good thing or a bad thing?

It's a complex set of trade off but then 1.9 trillion dollars will now be gifted to consumers so in the US every consumer will get a $500 dividend, in Germany 250 euros. On an average salary that is a one per cent pay raise but if that is spent on consumption, that's good. So let me start with the headline that's positive, no question about it.

And positive for India as well?

Oh massively positive. I mean if we do the country losers and winners, you have got Venezuela and Russia on the one extreme; frankly we have got the co euro zone, India and China on the other. So if you are a massive net importer of hydrocarbons which India is, this is very simulative and very good news.

You follow India very closely apart from the global economy. You had forecast the bubble and the subprime crisis. Do you see any such worries about India' banking system and the property market?

When I look at India this time there is room for cautious optimism certainly when in the banking sector. No matter which path this government goes down the need for significant credit extension is manifest. In the RBI Governor, we have an extraordinarily talented individual who has gone to the heart of the issue -- which is the balance sheets had to be cleaned up and he has taken some painful steps to do that. Indian banks came through the financial crisis rather well because they were well capitalised. Clearly the balance sheets need to expand and they need to be ready to support the needs of an economy which is going to grow a lot faster than it has grown in the past .

Rajan is quite conservative about reducing interest rates in India. Do you think he could have done it faster?

Well I give him a lot of credit for acting as decisively as he did a year ago when the rupee was getting volatile. He has been very focused on taming inflation and doing everything to make sure that the deficits come down. Howver now oil price dividend allows him a little bit room to manoeuvre.

China seems to be coming back or is it a secular slight slowdown?

What China is doing once again is a very smart and a very painful adjustment. They are going to go from almost export oriented model which relied on a very weak currency. That system served to generate jobs in China for a long period of time and allowed China to invest in its infrastructure and kept inflation in check in the US. It was a very nice example of what global trade can do. So my take on China is that they are now switching and focusing on domestic demand. They have fixed their banking system; they have taken some tough steps and in so doing their growth slowed down. Chinese growth this time is going to be more resilient more broad-based it may not hit the numbers you have seen in the past but they need 6 and half 7 per cent to keep their job creation.

That's a very positive outlook for China.

There are some issues. This adjustment has not been completely done. There's all these probes on the corruption side.

But you know the kind of model you described so well, how china grew. Is that over for India, can India do that again?

There's two ways of looking at it-- one which is 'made in India', the right strategy the next question is the timing right or not. India needs to create a million jobs every month just to stay where it is and that assumes that none of the farming sectors comes in. We have twin engines of a young labour force and urbanization which means a higher percentage will move from primary to secondary or tertiary sector. India needs to create jobs, it has a low share of manufacturing as percentage of GDP, so there's room to expand.

India has a great potential and the great clarity with which this government is driving this message. We ought to move in the right direction. The challenge of course is going to be ease of doing business. So if there's a single index. India is one of the hardest countries in the world to do business with; and unless this is tackled it would be hugely difficult to become an export giant like China.

Indian stock markets are at record level. Your guess for 12 months for now, higher, sideways or down?

It's up. I think with global circumstances and the growth of liquidity it will go with higher, unless mistakes are made.

India vs China who do you put your money on for returns?

Equity market still narrowly China but if I can chose sectors for long term benefits, India for sure. The potential is incredible. If the pre-conditions are met, there's no country that comes close to the promise that India offers.

You are one of the most successful Indian ever, holding one of the highest positions. If Narendra Modi asks you to work with him, what will you say?

A chance to serve the country and make a difference is an opportunity one can never pass up, but I have a commitment to the cause that I am dedicated to. I have to see that commitment through and make sure that the bank realizes its potential before I think about anything else.

One thing you'd like to see in the next budget?

Let's say two things, cut the deficits and really focus on growth.

Now Obama is coming to India for negotiations. One thing that India should give and one thing that India should take?

I am very impressed by the foreign policy initiatives of this government. Relationship with US is very critical it's the most powerful country in the world. I would give on the environment and trade talks and would really encourage the US to stay involved with a geopolitical standpoint in Afghanistan.

What is the next big thing of Deutsche bank in India?

We are looking to growing to serve more clients and deepen network in the country. We are committed to become bigger in India.

Last, question what would have you been if not a banker?

I would have liked to be a journalist if not a banker.