India must safeguard its economic growth by retaining policy autonomy and managing global capital flows effectively: Dr V Anantha Nageswaran, Chief Economic Advisor to the Government of India at CII Finance 3.0 Summit

Non-bank financial institutions are crucial for deepening the corporate bond market and channeling more capital: SBI Chaiman

Retaining policy autonomy and creating space to insulate our economy from the volatility of global capital flows is critical at a time when global capital flows have remained robust while trade globalization has slowed down, highlighted Dr V. Anantha Nageswaran, Chief Economic Advisor to the Government of India, during the inaugural session on ‘Is India’s financial sector geared up to support our country’s sustained double-digit growth?’ at the Financing 3.0 Summit of the Confederation of Indian Industry (CII) in Mumbai today. “With a modest current account deficit, India relies on global capital flows, but India has one of the brightest global economic growth prospects. It is up to us to sustain this momentum and use it to our advantage in carving out policy space for ourselves”, he added. Dr Nageswaran is also the Chair of the Summit.

Dr Nageswaran noted that the phenomenon of financialization, characterized by a high level of market capitalization relative to GDP, leads to a disproportionate focus on market expectations and trends which can distort macroeconomic outcomes and policy discourse. “As India looks ahead to 2047 with optimism and hope, this is what we must avoid because the consequences of such financialization are evident in many advanced economies, including unprecedented levels of public and private debt, economic growth increasingly dependent on continued asset price inflation, and a massive surge in inequality,” he emphasized. India must steer clear of these outcomes to ensure sustainable and inclusive growth, he further added.

Emphasizing the need to develop corporate bond market, Shri C S Setty, Chairman, State Bank of India noted that it is essential for non-bank financial institutions, such as insurance companies, mutual funds, and pension funds, to participate in the corporate bond market to help channel more capital into the market. Addressing concerns about stagnant deposit growth in banks and its impact on credit expansion, Shri Setty noted that credit growth should be driven by a diverse range of financial sector players, and not just banks.

The SBI Chairman further highlighted the need to develop skillsets within the universal banks to handle credit to new sectors. “We need to continuously innovate in terms of delivering the products. When it comes to the complex models of corporate financing, especially in the new emerging areas like battery storage, hydrogen, etc., they also require capital going forward. While we expect much of the capital to come from overseas to support the domestic capital formation, universal banks, particularly large banks, are expected to play an important role in infrastructure financing,” he added.

Mr Sanjiv Bajaj, Past President of CII and Chairman & Managing Director, Bajaj Finserv Limited, underscored the need to enhance credit availability, increase the spread of financial markets, and further develop & deepen the corporate bond market. He emphasized the importance of fostering greater harmony between various regulators to ensure that policies, while robust, also allow for innovation and are aligned.

Mr Ashishkumar Chauhan, Managing Director & CEO, National Stock Exchange noted that it is critical to look forward to adopting newer and fast-moving technologies that add a huge value with a little capital and will play a major role in the growth of capital markets in India. He emphasized that by preventing excessive corporate debt and leveraging new technologies that enable innovation and significant wealth creation with minimal capital, our capital markets can play a greater role.

Mr Chandrajit Banerjee, Director General, CII said that the role of financial institutions is crucial in supporting not only small and mid-sized enterprises but also micro-industries, helping them become more competitive and seamlessly integrated into the supply chain. He further added that for India’s SMEs to succeed, addressing challenges such as green financing, digital transformation and ESG criteria is essential.

The session was moderated by Ms Ira Dugal, India Financial News Editor, Reuters.

2nd September 2024

Mumbai