Capital allocation flaw in China model offers learning: KV Kamath

Veteran banker K V Kamath on Friday said spending on infrastructure like roads, railways and power will lead to rapid economic growth in the country for the next fifteen years. Kamath also cautioned about lessons that need to be learnt from the China model of infrastructure growth, under which continued deployment for the sake of 10% plus growth led to creation of unproductive assets.

In a chat with Shashwat Goenka, vice chairman, RP-Sanjiv Goenka Group at Fortune India 40under40 awards on Friday, Kamath said, “Let us take roads, railways and power. We are short on all these. There is a ten-to-fifteen-year runway to build these, which creates rapid economic development. Infrastructure is a very important category of investment. During the process of investment, growth happens. Once infrastructure is laid on the ground, the dividend from that infrastructure starts coming in.  Also with urban rejuvenation, rural modernisation, and homes that need to be built, there is a vast spectrum.”  

“China example has taught us what not to do. The mistake there was, to keep the 10% growth going, the deployment of capital for infrastructure became less and less productive,” Kamath added.