Help young India
The biggest challenge is financial inclusion of the poor in areas without banks.
Today, as we celebrate the 25th anniversary of Kotak Mahindra, I look at our development as a product of India's reform process over the last 25 years. The economy accelerated out of the so-called Hindu rate of growth and today reports a globally respectable and stable pace. The capital markets are sound, and foreign exchange reserves are rising.
The propeller of India's growth and resilience has been high savings in the urban and semi-urban areas. This, coupled with the global information flow and a demand for quality lifestyles, has meant higher consumption and demand. Several factors have aided this growth. Entrepreneurship blossomed in the last decade, as exemplified by the information technology sector, and services and related areas in the new age knowledge economy were equally robust. From being laggards, the telecom and automobile industries are today ahead of global standards. The services sector has provided jobs to millions of young Indians.
Technology is driving innovation, one example being the way mobile telephony is taking banking to the remotest parts at low transaction costs. Financial services are now within the reach of more people.
At the macro-level, India's robust financial system weathered the global financial crisis without major hiccups. The stock market has generated returns of over 15 per cent per annum for the last 10 years and we can expect this rate to increase in the next two decades. This in turn would help us attract investment, local as well as global. However, domestic demand and the economy will continue to grow only if we take long-term measures.
Infrastructure is not only the key to realising India's potential; it is probably the single-biggest factor in ensuring that the growth is sustainable. A fast-urbanising population of 1.2 billion makes it imperative to speed up project approvals, implement new financing models and attract investors.
India spends a high percentage of its GDP on infrastructure, but this is still less than what several countries in Asia spend, and less than half of what China does. Investment here can be boosted if the private sector plays a bigger role. Corporate India is changing its global outlook. The approach now is more towards strategic growth with an emphasis on long-term value creation. The key is to grow the India piece of a business and keep a percentage of growth global. A strong reason for this is that capital is now cheaper than ever before for corporate India, and the growth is coming from India.
Around the world, leaders are struggling to meet the imperatives of development in an environmentally sustainable way. India Inc is doing its bit, but we need a national programme for energy conservation, greater use of renewable energy, fuel substitution and pollution abatement.
For the financial sector, the biggest challenge is financial inclusion of the poor in areas without brick-and-mortar banks. The banking system has to develop cost-effective methods to reach out to such people. Growth brings opportunities and we need to help the Young India by promoting small and medium enterprises, self-employment opportunities and education.
The financial sector will be judged by how it helps bridge the rich-poor gap. The excitement will lie in creating a system that can generate efficient investments and support growth and poverty reduction. The principle of growth with equity has shaped India's financial sector.
The people need financial services and institutions that meet their trust. The financial system must have dynamic supervisory systems that anticipate and manage systemic risks, a strong governance and effective and leak-proof delivery.
With strong underlying fundamentals and a stable macro-economic outlook, India is well-positioned to attract a substantial portion of global capital flows. At Kotak we pride ourselves on being the India experts. We have a unique understanding of the Indian marketplace. We believe this equips us to be a key piece in the India growth story and a serious global player in the decades to come. I am hopeful that 20-25 years down the line we would be a major global bank of Indian roots and BT would speak to us again.
The propeller of India's growth and resilience has been high savings in the urban and semi-urban areas. This, coupled with the global information flow and a demand for quality lifestyles, has meant higher consumption and demand. Several factors have aided this growth. Entrepreneurship blossomed in the last decade, as exemplified by the information technology sector, and services and related areas in the new age knowledge economy were equally robust. From being laggards, the telecom and automobile industries are today ahead of global standards. The services sector has provided jobs to millions of young Indians.
Technology is driving innovation, one example being the way mobile telephony is taking banking to the remotest parts at low transaction costs. Financial services are now within the reach of more people.
At the macro-level, India's robust financial system weathered the global financial crisis without major hiccups. The stock market has generated returns of over 15 per cent per annum for the last 10 years and we can expect this rate to increase in the next two decades. This in turn would help us attract investment, local as well as global. However, domestic demand and the economy will continue to grow only if we take long-term measures.
Infrastructure is not only the key to realising India's potential; it is probably the single-biggest factor in ensuring that the growth is sustainable. A fast-urbanising population of 1.2 billion makes it imperative to speed up project approvals, implement new financing models and attract investors.
India spends a high percentage of its GDP on infrastructure, but this is still less than what several countries in Asia spend, and less than half of what China does. Investment here can be boosted if the private sector plays a bigger role. Corporate India is changing its global outlook. The approach now is more towards strategic growth with an emphasis on long-term value creation. The key is to grow the India piece of a business and keep a percentage of growth global. A strong reason for this is that capital is now cheaper than ever before for corporate India, and the growth is coming from India.
Around the world, leaders are struggling to meet the imperatives of development in an environmentally sustainable way. India Inc is doing its bit, but we need a national programme for energy conservation, greater use of renewable energy, fuel substitution and pollution abatement.
For the financial sector, the biggest challenge is financial inclusion of the poor in areas without brick-and-mortar banks. The banking system has to develop cost-effective methods to reach out to such people. Growth brings opportunities and we need to help the Young India by promoting small and medium enterprises, self-employment opportunities and education.
The financial sector will be judged by how it helps bridge the rich-poor gap. The excitement will lie in creating a system that can generate efficient investments and support growth and poverty reduction. The principle of growth with equity has shaped India's financial sector.
The people need financial services and institutions that meet their trust. The financial system must have dynamic supervisory systems that anticipate and manage systemic risks, a strong governance and effective and leak-proof delivery.
With strong underlying fundamentals and a stable macro-economic outlook, India is well-positioned to attract a substantial portion of global capital flows. At Kotak we pride ourselves on being the India experts. We have a unique understanding of the Indian marketplace. We believe this equips us to be a key piece in the India growth story and a serious global player in the decades to come. I am hopeful that 20-25 years down the line we would be a major global bank of Indian roots and BT would speak to us again.
