Financial Sector's Role
According to Anuradha Thakur, the financial sector is poised to become the driving force behind India's next economic surge. She stressed its importance
in maintaining high-growth momentum, especially in the face of international economic challenges. Thakur advocated for a united front, urging both the government and private sector to work together to fortify the financial sector. This involves strategic initiatives aimed at bolstering various segments of the financial ecosystem. The Economic Affairs Secretary's insights provide a roadmap for the future direction and collaborative efforts required to ensure the financial sector effectively supports India's economic growth ambitions.
Key Priority Areas
Three primary areas were flagged by Thakur as crucial for immediate attention and joint action. The first involves strengthening the corporate bond market, an essential component for providing diverse funding options to businesses. The second involves expanding the reach of investment instruments, such as real estate and infrastructure investment trusts, beyond their current niche market positioning. Finally, a significant emphasis was placed on boosting other pooled investment vehicles, along with municipal bonds. These strategic focal points are designed to create a more robust and adaptable financial framework, which in turn will support the nation’s overall economic performance.
Resilience and Stability
The financial sector is key to India's ability to withstand shocks and external pressures, including disruptions from US tariffs and global geopolitical tensions, according to Thakur. She highlighted the importance of various regulatory and operational practices. These encompass prudent regulations, robust governance standards, and a measured approach to liberalisation. A strong banking system, deeper financial inclusion initiatives, and a calibrated approach to foreign currency exposure are also vital. Furthermore, the Secretary underscored the significance of robust payments and digital infrastructure, a diversified financial infrastructure, and strong macroeconomic management as essential elements for a stable and thriving financial ecosystem. These elements collectively contribute to the sector’s resilience and ability to navigate uncertain global conditions.
Structural Shifts Noted
Thakur also described three major structural changes underway within the financial system. The first significant change is the rapid 'financialisation' of savings, characterized by the rise in assets managed by mutual funds, even as the growth of low-cost deposits slows. Second, there has been a shift away from bank-dominated credit, with banks’ share in total loans decreasing from 77% in FY12 to about 60% in FY22. Finally, Thakur pointed to a notable surge in equity market participation, exemplified by a six-fold increase in IPO activity since 2013. These transformations reflect the evolving financial landscape and present both opportunities and challenges for India’s economic growth trajectory.
