Viksit Bharat 2047 Archives

5 Things India’s Banks Must Do For Viksit Bharat…

8 September 2024
by admin

Boston Consulting Group (BCG) in association with FICCI and the Indian Banks’ Association has released a report titled “Banking for a Viksit Bharat” at FIBAC 2024. As per the report, India’s ambition to achieve a $30 trillion GDP by 2047 will require a 20 times growth in the financial services sector, with banks playing a pivotal role.

India, being a predominantly bank-led economy, will require the banking sector to play an anchor role while the other financial asset classes continue to grow much faster. This will require $4 trillion of capital base in banks, 1/3rd of which will have to be fresh capital deployment.

India’s banking system is in a strong position today – characterised by high profitability, robust capital adequacy, and low levels of non-performing assets (NPAs). This provides an ideal launchpad for the Viksit Bharat mission, the report added.

“The journey towards a $30 trillion economy by 2047 is an ambitious yet achievable goal for India, demanding a transformation in the financial services sector, with banks at the forefront. India’s banking system is in a strong position today acting as an ideal launch pad for the Viksit Bharat mission. It will have to be built for the next 2 decades through structural shifts – growing deposits, enhancing asset quality, and improving productivity while advancing digital capabilities and future competencies,” said Ruchin Goyal, MD and senior partner at BCG, and co-author of the report.

“One of the primary objectives of the banking industry is to ensure financial inclusion, creating opportunities for every individual to grow and contribute to the nation’s progress. To fuel inclusion and credit growth, we must continue to innovate and reimagine our deposit strategies, aligning them more closely with the evolving needs and preferences of our customers. This growth will be aided by the full potential of our workforce which must be harnessed using digitisation and emerging technologies like GenAI,” said MV Rao, chairman of the Indian Banks’ Association, and co-author of the report.

“India’s Digital Public Infrastructure has laid the foundation for a strong and resilient financial infrastructure and accelerated the pace of digitisation. It is now about taking capabilities to the next level and building for the next two decades – Resilience, climate and cyber security need to be strengthened, with centralised, real-time network and specialised talent. The banking sector’s success is instrumental in making India a developed nation,” said Jyoti Vij, director general at FICCI, and co-author of the report.

The report highlights five key structural themes that banks need to work on for the continued success of the Indian banking sector;

A) Future of Household savings:

Households are increasingly shifting from physical to financial assets, and from informal to formal borrowing channels. Bank deposits are shifting to pension savings and capital market investments, while retail lending expands. Despite this, financial assets and borrowings remain under-penetrated, offering significant growth potential. Banks must innovate deposit products, enhance customer awareness, and adopt new operating models to sustain growth. Structural support is needed to create new deposit pools for targeted lending, as banks continue to play a key role in funding large-scale projects and sectors.

B) Addressing challenges with asset quality & pockets of leverage:

Retail lending has driven financial inclusion and profitability for the banking industry. The shape of this growth is very different though. Unsecured lending has grown much faster. The unsecured to secured loan mix is 30:70 in India (vs. 10:90 for many large economies).

India has a large adult population outside the formal workforce (~90%), and hence largely outside the ambit of formal financing channels. India has quickly gone from being a data-poor to a data-rich country. Lenders will have to re-imagine the operating model and underwriting capabilities to serve this segment. India will need to chart its course on driving retail and MSME lending penetration.

C) Banks need to take a bold vision on productivity:

India Stack has revolutionised the financial infrastructure, driving digitisation in payments and product sales. However, rising costs, driven by increased technology spending, outpace income growth. Despite high-tech spending, banks globally are not seen as innovative, and Indian banks are still under-indexed in IT investments. Banks will need to boldly reimagine their operating model and break the ‘sticky’ legacy cost structure.

D) Banks to continue investing to drive digital funnel growth:

Leading Indian banks rank among the top globally in digital maturity, with BCG’s proprietary benchmarking tool showing that both private and public sector banks score higher than global peers across various parameters related to customer experience. Many banks need to continue investing to bridge the gap. While India Stack has enabled excellence in payments, banks still need to monetise digital opportunities across other dimensions like product fulfilment journeys and money insights.

E) Banks to focus on building future capabilities:

The Indian banking system has made significant strides in building future-ready competencies but must embrace the next wave of opportunities. Resilience must extend beyond technology to encompass entire business processes.

Banks face a “GenAI paradox,” struggling to scale initiatives beyond pilots. This will require mission-mode COEs to address key capability challenges. Climate risk presents both threats and a $2.5 trillion financing opportunity, demanding a shift in operating models. Additionally, India’s banks must tackle increasing cyber risks, necessitating a centralised, real-time network and specialised talent to mitigate threats.

While India’s banking sector has made significant strides, achieving the Viksit Bharat mission will require sustained momentum. The banking sector’s success is instrumental in making India a developed nation.

A concerted effort of industry participants, government and regulators will be critical to facilitate this – key actions include:

Banks to innovate products and drive customer awareness
Regulators to lead the way in the use of advanced analytics to enhance the efficacy & efficiency of supervision
Government to promote consolidation of smaller segments of the industry to unlock value.

Science & Environment

India Needs To Strive To Be USD 30 Trillion…

28 July 2024
by admin

New Delhi: India needs to strive to be a USD 30 trillion economy by 2047 with a per capita income of USD 18,000 per annum to become a developed economy, NITI Aayog has said in an approach paper ‘Vision for ‘Viksit Bharat @2047’.

According to the paper, which was discussed in the NITI Aayog meeting on Saturday, India needs to avoid the middle-income trap. The paper said that Viksit Bharat is envisioned to be built on the three pillars of ‘Demography, Democracy and Diversity’.

Prime Minister Narendra Modi chaired the Ninth Governing Council meeting of NITI Aayog. The paper said that studies have shown that barely a dozen middle-income countries have broken out to become develop high income countries in the last 70 years. “Progressing from a middle-income to a high-income level requires sustained growth in the range of 7-10 per cent for 20–30 years.

Very few countries have managed to do this. The reasons have been well analysed and include structural, institutional, and other socioeconomic factors. As a nation we need to avoid this trap and carefully work towards breaking out of it,” the paper said.

“As for the economy, to become a developed nation, we need to strive to be a USD 30 trillion economy by 2047 with a per capita income of USD 18,000 per annum. The GDP would have to grow nine times from today’s USD 3.36 trillion and the per capita income would need to rise eight times from today’s USD 2,392 per annum,” the approach paper said.

Referring to the tangible gaols for Viksit Bharat, the paper said that on the demographic front, India can aim for raising the average life expectancy to around 84 years. “The Total Fertility Rate (TFR) will be gradually declining to about 1.80 and the population stabilising at about 165 crores by 2047.

Being a youthful nation, the working age population would be around 112 crores, making it the single largest workforce of any nation in the world. In a similar manner, we can aim for tangible goals on some basic parameters such as literacy and health with a target of universal literacy and a very low Infant Mortality Rate (IMR),” it said.

For Bharat@2047, the paper projects a median population age of 37 years. In terms of social profile, it calls for 100 per cent literacy rate, over 70 per cent female labour participation (from current 37 pc), 100 per cent skilled workforce and top 10 in global gender equality.

In terms of economic profie, the paper calls for over USD 18,220 per capita GDP, 34 per cent industry contribution to GDP and 55 per cent reduction in carbon emission intensity from 2005 level. “These goals are just a few illustrative examples of what our nation should aim to achieve.

Viksit Bharat @ 2047 is ambition of every Indian. States can play an active role to achieve this aim as they are directly connected with the people: Prime Minister @narendramodi at the 9th Governing Council Meeting of #NITIAayog. The Governing Council Meeting is being attended by…
— NITI Aayog (@NITIAayog) July 27, 2024

There should be similar goals in all spheres of life, be it for individuals, for the economy or for governance. It is only the steadfast pursuit of these goals across all spheres of human endeavour that will enable India to become a Viksit Bharat. Team India will have to work together to realise this Vision by strategizing, planning and implementing policies, programmes and interventions in a spirit of cooperative federalism,” the paper said.

The paper said that Viksit Bharat represents “our collective vision to transform India into a developed country where each individual will live up to her/ his potential with meaningful lives and livelihoods, and the entire society and economy will flourish.”

“As India stands at this crucial juncture, poised to take off on its growth trajectory, it is important to realise that tremendous dedication and belief in India’s destiny is necessary to realise this potential. There is enormous work that needs to be undertaken in a mission mode to achieve the vision of a Viksit Bharat by 2047.”

“Business as usual will not do. We must create the future. It is important to channelise our innovative ideas into actions. There must be a sense of purpose, dedication and steadiness to use the Amrit Kaal in building a nation that our freedom fighters envisaged and sacrificed for….

“This has to be a collective endeavour of the Centre and States. Most of the actions in social sectors are to be done by States and a significant portion of capital investments too have to be done by States. We need to see that all States develop rapidly and also converge in their incomes and in the quality of life they are able to provide. We need to integrate all markets across the country, for goods, labour and capital,” the paper added. The approach paper also defines what is Viksit Bharat.

“It is a Bharat which will have all the attributes of a developed country with a per capita income that is comparable to the high-income countries of the world today. It is a Bharat whose social, cultural, technological, and institutional features will mark it out as a developed nation with a rich heritage and one that is capable of functioning at the frontiers of knowledge.

The World Bank defines high income countries as those whose annual per capita income is more than US $ 14,005 (in 2023). India has the potential and aims to be a high-income country by the centenary of its independence in 2047,” the paper said.

The paper talks of India’s transformation on many fronts, specially in the last decade, demonstration of quantum leap capabilities, unique advantages as also internal challenges that should be addressed.

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5 Things India’s Banks Must Do For Viksit Bharat…

India Needs To Strive To Be USD 30 Trillion…