Chief Economic Advisor V. Anantha Nageswaran on India’s Growth and Financial Sector

New Delhi [India] September 2: Policy autonomy and managing global capital outflows effectively will safeguard India’s growth momentum, says V. Anantha Nageswaran, Chief Economic Advisor to the Government of India. Addressing the inaugural session on ‘Is India’s financial sector geared up to support our country’s sustained double-digit growth?’ at the Financing 3.0 Summit of the Confederation of Indian Industry (CII) in Mumbai today, CEA said, “With a modest current account deficit, India relies on global capital flows, but India has one of the brightest global economic growth prospects. It is up to us to sustain this momentum and use it to our advantage in carving out policy space for ourselves,” he added.

Nageswaran noted that the phenomenon of financialization, characterized by a high level of market capitalization relative to GDP, leads to a disproportionate focus on market expectations and trends which can distort macroeconomic outcomes and policy discourse. “As India looks ahead to 2047 with optimism and hope, this is what we must avoid because the consequences of such financialization are evident in many advanced economies, including unprecedented levels of public and private debt, economic growth increasingly dependent on continued asset price inflation, and a massive surge in inequality,” emphasized Nageswaran.

Speaking at the Summit, C S Setty, Chairman of the State Bank of India, emphasized the need to develop the corporate bond market when bank deposits are declining. He said that it is essential for non-bank financial institutions, such as insurance companies, mutual funds, and pension funds, to participate in the corporate bond market to help channel more capital into the market. Addressing concerns about stagnant deposit growth in banks and its impact on credit expansion, Setty noted that credit growth should be driven by a diverse range of financial sector players, and not just banks. The SBI Chairman noted the need to develop skillsets to handle credit to new sectors. “We need to continuously innovate in terms of delivering the products. When it comes to the complex models of corporate financing, especially in the new emerging areas like battery storage, hydrogen, etc., they also require capital going forward. While we expect much of the capital to come from overseas to support the domestic capital formation, universal banks, particularly large banks, are expected to play an important role in infrastructure financing,” he added.

Sanjiv Bajaj, Past President of CII and Chairman, underscored the need to enhance credit availability, increase the spread of financial markets, and further develop and deepen the corporate bond market. He emphasized the importance of fostering greater harmony between various regulators to ensure that policies also allow for innovation and are aligned.