The Indian banking industry has evolved over the decades and continues to play an important role not only in sustaining growth, in ensuring investments, but also looking at those sectors or sections of the society too which need more support of the banking industry. In the global context, the Indian banking industry is still growing. It has the potential but it has kept steady and at the right course. We recall when I was young the talk of bank nationalisation came primarily because of the need for the banks to look at the commitments of a country to the disadvantaged, deprived sections and the hinterland where the supports and resources were required.
Today’s India is a different India. It’s true that even today the two-third of capital assets of the country is with the public sector banks. But the private sector banks have grown phenomenally and some of them have done exceptionally well making this country and banking industry proud. This has made it very clear that the banks, whether public sector or private sector, can continue to grow in the competitive environment and at the same time do what they are expected to do. By all projections Indian banking industry has the potential to become the third largest in the world in less than one-and-ahalf decades, growing from less than $1.5 trillion to maybe $28 trillion. It is not the quantum; what matters is how the banking sector growth is in sync with the country’s thinking and development. We know what this sector has seen in the last few years, I am not talking nationally but globally. In the last five years, or less than that, the discourse of the concern has been the banking sector and the financial sector. The 2008-09 financial crisis was worse than anything the world has seen in the last six decades, primarily because it was preceded by a very severe banking and financial crisis. But I would be hesitant to add here that we can draw little comfort from the fact that in 2009-10 countries like India, China, Indonesia, Brazil and other emerging economies rebounded quickly becoming the engines of the global economy recovery. There are certain fundamentals which are specific to India when it comes to the banking industry and its performance during that period. Here, I would give credit to India and to the RBI also, to our banking system. There was a minimal exposure to toxic credit as I say the fundamentals remained strong, the rate of savings was high, the rate of investment was high.
India also needs to accelerate when it comes to the growth of the GDP, but how will it come? Can it be done without agriculture, without manufacturing? Dr Rangarajan was right when he said that agriculture sustains over 60 per cent of our people and cannot grow beyond a point; it doesn’t mean it cannot grow. It has to. India has become self-sufficient in agriculture ensuring food productivity for people because of the great Green Revolution. This country should have started the second Green Revolution about seven to eight years ago. I say so because there is no country in the world which can produce enough to feed 1.2 billion Indians. India has to do it itself and remain food surplus as we have to support other countries which need the same food security. Today we are one of the largest food exporting countries. We have our granaries full. There is no problem though there are concerns. Nobody likes a weak monsoon. But again it will not grow beyond 4 per cent. Anything else can grow but the landmass.
Today the agrarian agriculture holdings are getting fragmented in smaller parts. Population has travelled since Independence. Therefore, where we will find other avenues is only through manufacturing. It’s not only about industry, but also about value addition engineering. There has been an important factor which continues to be and always shall be, is the social dimension.
Only manufacturing can provide employment to young Indians. Over 700 million Indians are young. India is home to 17 per cent of the world’s population but 20 per cent of world’s children live here. We have to think about them. We have to invest in them. And manufacturing is the only way to take it forward. Even services industry’s contribution to GDP cannot grow beyond a point. Globally, historically, services will grow on the strength of manufacturing. We had thought about the national manufacturing policy. I was wondering why it was not done a decade before and the large objective of the policy is to raise the share of manufacturing in India’s GDP from 16 per cent to 25-26 per cent in one decade, to create 100 million skilled jobs in one decade.
The other important area of our concern is exports. Current account deficit, Dr Rangarajan rightly referred to. Fiscal deficit is one issue. But current account deficit is always a matter of great worry and how you perform when it comes to trade and that too at a time when there’s a global contraction. The prognosis for 2012 is neither good for the world economy nor for the world trade. But we have to somehow keep on growing. That’s a big challenge.
Ever since the interest rates have been raised, not for the savings but for lendings, the CRR is an issue; Reserve Bank has a duty to perform and we respect that. But at the same time, I’m not in agreement with those who believe that stifling liquidity or squeezing liquidity out to address the challenge of inflation is the answer to the present problem. You have to find that balance. Liquidity must remain, credit must remain available at lower costs for the industry and for the exporters. Because, again, the social factor cannot be overlooked.
Particularly it is important to reach out to those who do not have access to bank ATMs, who have never filled the bank deposit forms. These are the deprived sections, it’s not their fault. It’s again historical reasons of our colonisation and subjugation. How do we help them? Technologies have empowered our banks. And they should grow more so that each Indian has access to credit and banking services. Then only we can say that we are growing in a right manner, in an inclusive manner.
We have a vision, as I say, I want to see in my lifetime, India as the workshop of the world. We can become an economic leader which we are becoming.
-Sunday Standard