India’s Financial Strategy to Sustain Growth Spotlighted at Financing 3.0 Summit

Chief Economic Advisor V Anantha Nageswaran highlights the importance of policy autonomy and effective capital outflow management for India's growth. At the Financing 3.0 Summit, experts stress the need for diversified financial players and innovation to support sustainable credit growth and infrastructure financing.

Policy autonomy and effective management of global capital outflows are crucial to maintaining India's growth trajectory, stated V Anantha Nageswaran, Chief Economic Advisor to the Government of India. During the inaugural session of the 'Is India's financial sector geared up to support our country's sustained double-digit growth?' at the Financing 3.0 Summit hosted by the Confederation of Indian Industry (CII) in Mumbai today, Nageswaran emphasized the importance of these strategies.

With a modest current account deficit, India depends on global capital flows. However, India boasts one of the brightest global economic growth prospects, which needs to be leveraged to create favorable policy space, Nageswaran noted. He pointed out that financialization—characterized by high market capitalization relative to GDP—can lead to a distorted macroeconomic landscape if unchecked, as witnessed in many advanced economies with their high levels of public and private debt.

As India anticipates 2047 with optimism, avoiding the pitfalls of financialization is essential to prevent economic growth from becoming too dependent on asset price inflation and rising inequality, Nageswaran stressed. State Bank of India Chairman C S Setty highlighted the necessity of developing the corporate bond market, especially as bank deposits decline. Setty emphasized that non-bank financial institutions must be active in the corporate bond market to channel more capital effectively.

Addressing the issue of stagnant bank deposit growth and its impact on credit expansion, Setty suggested that credit growth should come from a variety of financial sector players, not just banks. He emphasized the need for continuous innovation in corporate financing, particularly in emerging areas like battery storage and hydrogen. According to Setty, overseas capital is expected to support domestic capital formation, but large universal banks will play a crucial role in infrastructure financing.

Past CII President Sanjiv Bajaj echoed these sentiments, calling for enhanced credit availability, wider financial market spread, and deeper development of the corporate bond market. Bajaj also stressed the need for greater coordination among regulators to ensure policies that permit innovation and are well-aligned.

(With inputs from agencies.)