India’s economic landscape is looking bright, with the government forecasting a 7% GDP growth for the next seven to eight years, aiming to sustain this momentum for the long term. This ambitious goal necessitates a robust financial sector, and the government is taking concrete steps to ensure its readiness.
One of the key initiatives is the establishment of a National Financial Information Registry (NFIR), announced by Finance Minister Nirmala Sitharaman in her 2023 budget speech. The NFIR will serve as a centralized hub for financial and ancillary information, crucial for improving the credit rating mechanism and facilitating a smoother flow of credit. The registry is nearing completion after extensive consultations and is expected to be operational soon.
The government’s commitment to financial inclusion is another significant factor driving growth. While India has made strides in expanding bank account access, with nearly 70% of the population now having one, there’s still room for improvement in areas like insurance penetration. The current penetration stands at a relatively low 4.2%, compared to over 10% in advanced economies, highlighting the potential for growth in this sector.
Beyond the NFIR and financial inclusion, the government is working on several other fronts to optimize the financial sector for sustained growth. These include:
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Deepening the Bond Market:
India’s bond market currently relies heavily on rated issuances, excluding a large segment of economic players from accessing this avenue for capital. The government recognizes the need to address this gap and promote the development of the secondary market.*
Capital Raising:
The government is focused on facilitating greater capital raising through Initial Public Offerings (IPOs) and increasing annual inflows into the mutual fund market. While there has been a significant increase in IPO activity, it still represents only 0.2% of GDP. Similarly, the annual inflow into mutual funds, while substantial at ₹ 60 lakh crore in assets under management, is only 0.6% of GDP.*
Global Financial Sector Integration:
The government aims to enhance India’s participation in the global financial sector, attracting more international investments and boosting its financial standing on the world stage.*
Cybersecurity and Data Protection:
The government is prioritizing the development of robust cybersecurity measures and data protection frameworks to mitigate risks associated with artificial intelligence and the digital transformation of the financial sector.*
Nurturing Talent:
India is focusing on building a skilled workforce for the future of its financial sector, investing in education, training, and development programs to ensure a skilled talent pool.India’s commitment to a robust and inclusive financial system, coupled with the ongoing initiatives to promote growth and innovation, positions the country well for a bright economic future. The government’s comprehensive strategy is expected to drive substantial growth and development, paving the way for a more prosperous and empowered India.
