India is a land of great opportunity. The rapid changes of the last decade are a precursor to the much greater growth and prosperity that we can achieve in the coming years. The coming decade has the potential to take India’s economic transformation forward and establish India as a leading economic power and a major driver of global growth.
The Indian economy has displayed remarkable resilience through the global crisis, due to strong domestic fundamentals in terms of domestic demand and investments and also a strong financial sector. Article continues below the advertisement...
The strong domestic fundamentals have been able to support recovery and drive the economy back to growth. The key factors responsible for this are India’s regulatory approach towards managing growth with stability and the prudent lending practices of Indian banks. In spite of periodic challenges on account of global developments, volatility in capital flows, inflation and other factors, the underlying momentum of our demographic dividend and investment potential can support robust growth over the long terms.
The India of today and the one of even a decade back are remarkably different. Given this transformation of the Indian economy and the strength of the fundamentals supporting it, the next decade will see Indian banks scale up their business and move up in the global league tables.
India’s economic fundamentals should enable it to average around 8% real gross domestic product (GDP) growth over the next several years. To support this kind of GDP growth, bank credit would need to grow by a multiplier of about 2.5 x GDP growth. This means average bank credit growth of about 20% annually.
This means the current non-food credit will be five times the current level by 2020. This is the kind of scale we have to be ready for if banks are to play the role they need to play in this growing economy. I believe these are actually conservative estimates — we are just talking of 20% average annual credit growth for a decade, which is not so difficult to envisage.
But of course, playing this role in India’s growth and realising this potential will require strategic thinking and careful execution by Indian banks. We will have innovation to deliver products and services to every segment of the country — from the global corporate to the SME, from the ultra HNI to the NREGA beneficiary. Indian banks will have to increasingly rely on using technology effectively, to improve sales efficiency, service quality and employee productivity — key factors for survival and growth. The drive for innovation is already present in most of the banks in India. Banks will now work on their ability to deliver segment-specific products and service propositions tailored to customer needs. They would leverage channels like ATMs, Internet, mobile and other emerging banking channels to reach out to include the larger part of India that remains unbanked.
Looking ahead, operationally, one can see that banks would increase their engagement in managing human resources and talent to build lean operations. Many would reorganise their operations in way that focus would be on customer service and efficient reach, and there is tremendous scope for improvement here.
India’s economy has just begun its long and sustained journey to fast growth and prosperity. As we move on, several new opportunities will be discovered which we perhaps cannot even foresee today. We are indeed fortunate to be part of this exciting journey.