Banking can Spur India's Great Leap Forward

Several innovations are underway in India's banking sector. For India to leap forward in the next 25 years, banking needs to be reimagined

- BY AMITABH CHAUDHRY

INDIA HAS HAD a relentless journey since it became an independent republic 75 years ago. Despite myriad challenges on the economic and social fronts, the country has managed to carve a path that has brought it to the threshold of a new economic golden age. One need not look too far into the past for proof on how resilient the country is. The 'Black Swan' event of the Covid-19 pandemic was a test of resilience for all the economies of the world, but India stood out. Through its journey of trials and errors, hard decisions and visionary policies, India has emerged with a renewed sense of purpose, stability and devotion to inclusive progress.

From where we stand today, India is set to become a nation of around 1.64 billion people, and perhaps, the world's second-largest economy by 2050. Its GDP is estimated to touch $20 trillion in the next 25 years from $3.1 trillion currently with an annual per capita income of around $10,000 at an average economic growth rate of 7-7.5 per cent. Nearly half of India's population will be living in urban areas, and use of technologies such as augmented reality, blockchain, and artificial intelligence (AI), would have become normal. India can only move forward from here.

However, for India to achieve long-term growth, it will need to prioritise striking a balance between consumption and investment. A healthy mix of domestic and global savings and capital to optimise debt utilisation is an imperative. The country will also be required to improve its sovereign credit ratings. Although, its current BBB-rating is lower than what its macro fundamentals would warrant (since sovereign external debt is negligible), an improved rating would lower interest rates and the cost of capital for all enterprises.