India is a fascinating case of how to use technology to promote financial inclusion and growth: Luis E Breuer, Senior Resident Representative for India, International Monetary Fund (IMF)

At a plenary session on ‘Capital Markets: Financing India’s Journey to Becoming a Developed Nation,’ a range of business and institutional leaders expressed their views on the success story of financing India’s growth as also the challenges. They were speaking at the Global Economic Policy Forum, organised by CII, in partnership with Department of Economic Affairs. 

Highlighting the significance and relevance of Indian Capital markets, Ashishkumar Chauhan, Managing Director and Chief Executive Officer, National Stock Exchange said “30 years ago, India’s Market capitalisation to GDP ratio was around 44% which is now 118% and we are now the 4th largest in terms of market capitalisation despite low per capita income.

He added that we have become a trustful country in the last 30 years, showing confidence of investors in various institutions and more importantly in our entrepreneurs. This would have not been possible without corporate governance and transparency.

Ridham Desai, Managing Director, Morgan Stanley said that “among the most important agents of economic development, a buoyant equity market is the only source of wealth creation for common man that has direct impact on consumption leading to better growth thereby completing the virtuous cycle”. Adding further, he said one of the most important policy changes in recent years which took place in 2015 is when government let retirement funds buy stocks which is leading to shift in the household portfolio towards equity allowing households to participate in the growth story.

Addressing the forum, Rajnish Kumar, Chairman, Mastercard India and former Chairman, State Bank of India said, “we are proud of our equity market but there is still lots of catching up to do in the debt market. We must develop an ecosystem where the dependence on banks as an intermediary goes down and the role of debt capital market increases. This includes securitisation, credit default swaps etc. Unfortunately, there has been risk aversion among the debt market regulators since the 2008 crisis.”

Luis E Breuer, Senior Resident Representative for India, International Monetary Fund (IMF) said that India has done very well in recent years and the financial sector provided support to its economic boom. However, the growth was not smooth and unaffected by the various global economic shocks during this journey. “These were compensated by the positive shocks in terms of government reforms, including flexible inflation targeting, bankruptcy code and remarkable digital transformation that India has gone through and is a fascinating case of how to use technology to promote financial inclusion and growth”. He said that going forward it is important for the country to continue on the reforms path focusing on the soft infrastructure which includes regulatory and institutional reforms. Modernisation of institutions will help India achieve its own development goals. He also said that in the Banking sector, greater participation of private sector and strengthening governance of public sector banks should be prioritised.  

Prithviraj Srinivas, Chief Group Economist, Mahindra Group, emphasised the importance of building trust in institutions and continued reforms for bringing down cost of doing business to attract investment for strengthening the capital markets.

Andrea Goldstein, Head of India/Indonesia, Economics Department, OECD (France), said that in the banking sector, India is still lagging compared to other emerging economies. Improving corporate governance in public sector banks is a low hanging fruit which can improve the investments and quality of assets in these banks. He also said that a lot more can be done in terms of financial education in the country.

Shereen Bhan, Managing Editor, CNBC-TV18, moderated the session.

7 December 2023

New Delhi