interview | Ari Sarker Business

‘Economy outlook positive, more capacity addition may be seen’

The overall outlook for the economy is very positive with even private sector investment showing green shoots of recovery, Ari Sarker, co-president, Asia Pacific for Mastercard, said in an interview. He added that the company was working closely with the Reserve Bank of India to achieve greater clarity and a resolution to the data localisation rules implemented by the central bank. Excerpts:

There are a lot of indicators pointing towards a slowdown in the economy. Are those points of concern for you considering you have committed to invest $1 billion in India over the next five years?

The broader macro story still remains extremely positive for India. The Indian economy has made great progress in the last five years and you are going to see much more capacity addition, and growth is going to increase.

One of the things that has sustained the economy over the last few years has been consumer spending. The public investment cycle has been the other enabler. However, the private investment cycle has not picked up for a variety of reasons such as the NPA issue, massive logjams in infra projects, capacity under-utilisation. All of those things are working themselves through. As those things work themselves through, and assuming nothing changes with the consumer behaviour and the government continues to have the kind of aggression that they've had on the public investment front, and now with private investment the cycle is now showing green shoots… If all of this comes together, the momentum for the economy is actually going to be stronger than the last five years.

Your investment announcement has come before the results of the general elections. Doesn't that create uncertainty for your business prospects and outlook in India?

India is in for coalition politics. We have seen it for 30 years and the last 5 years were an exception in that sense. But coalition politics is here to stay. My sense is that if the mandate is too fractured, then I think there are concerns. There have been massive structural changes in the last five years, such as GST, the IBC, and the bank balance sheet clean up. There is a lot more to be done in the coming years, and the challenge would be that if the mandate is fractured then the risk of politics becoming predominant and business decision-making and driving economic growth becoming secondary would be the concern.

We believe that India has crossed a certain watermark, and has gone beyond the point of no return. When we make these decisions, although it is a five-year outlook, we are thinking beyond five years.

What are the key changes you would highlight in the digital payments landscape in India over the last few years?

Over the last 3-5 years, you have seen massive inclusion. People have come into the financial net. The second enabler is the play of wallets and others that have come in. They are all driving for consumer adoption of digital payments capability. There’s also the massive ‘booster dose’ through demonetisation, which has led to people, who were already connected to the banking system but were still in the cash economy, coming into the digital economy. They haven’t gone back, that’s the interesting part.

The other thing that is a very positive enabler is UPI, IMPS have scaled up dramatically in the last few years, which means more people are connecting to the digital economy.

The acceptance environment is going through dramatic change. Pre-demonetisation, only about 1.3-1.4 million merchants accepted electronic payments. Today, we are at 5 million card based terminals.

Do you see UPI as competition to the cards business?

Competition is good. Looking at UPI transactional volumes, our whole thesis is that the consumers should have the choice of all options. The consumer gets to decide what option they want to use for what purpose. For example, if you want to be in the P2P environment, UPI and IMPS are fabulous options. In certain merchant-facing environments where UPI is making inroads, it’s working very well. In some cases, it may not work that well.

How has the data localisation rule impacted Mastercard?

Going back to April 2018 when it started, we have had complete engagement with the RBI all through the process. What we have tried to do is clearly signal to the RBI of our intent to be compliant from day 1. However, the notification was a very slim notification. We had a whole bunch of questions around what this actually means and therefore the debate and discussion has gone on over the pros and cons of the different approaches and aspects from data mirroring to data exclusively in India, the challenges around running fraud services for fraud scoring... All of that discussion over the last five months has been fairly back and forth with the RBI.

I feel encouraged that we have made good progress from around the middle of October. Our data now resides in India. The question has been data only in India. We have been working with the RBI to come to a resolution on when data should reside only in India.

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Printable version | Jul 2, 2022 5:07:20 am |