India’s US$30 trillion GDP target by 2047 hinges on financial sector growth

BCG report highlights the need for banks to play a central role and calls for structural changes in financial services

September 6, 2024

A BCG report stresses that India's banking sector will anchor this predominantly bank-led economy while other financial asset classes experience faster growth

Achieving this goal will require a US$4 trillion capital base in banks, with one-third of the amount coming from fresh capital deployment

The report highlights the current strength of India's banking system, which is marked by high profitability, strong capital adequacy, and low levels of non-performing assets (NPAs)

BCG notes the necessity for structural shifts in the sector, including growing deposits, enhancing asset quality, improving productivity, and advancing digital capabilities.

India’s ambition to reach a US$30 trillion GDP by 2047 will require the financial services sector to expand twentyfold, with banks playing a critical role in driving this growth, according to a Boston Consulting Group (BCG) report. The report, titled “Banking for a Viksit Bharat,” was released at the annual FICCI-IBA Conference.

The BCG report underscores the need for India’s predominantly bank-led economy to rely heavily on the banking sector as the anchor, even as other financial asset classes are expected to grow much faster. India’s banks will need a capital base of US$4 trillion to meet this ambitious target, with one-third needing fresh capital deployment. India’s banking system is robust, characterised by high profitability, strong capital adequacy, and low non-performing assets (NPAs).

Experts described the journey towards a US$30 trillion economy by 2047 as ambitious and achievable. It requires a significant transformation in the financial services sector led by banks. They highlighted the importance of building a solid foundation over the next two decades through structural shifts that include growing deposits, improving asset quality, enhancing productivity, and advancing digital capabilities and future competencies.

MV Rao, Chairman of the Indian Banks’ Association, stressed the importance of financial inclusion as a primary objective of the banking industry. He highlighted the need to create opportunities for everyone to grow and contribute to the nation’s progress.

Rao also emphasised that banks must innovate and reimagine their deposit strategies to drive inclusion and credit growth, aligning them closely with customers’ evolving needs and preferences. He suggested that this growth would be supported by maximising the potential of the banking workforce through digitisation and the use of emerging technologies like Generative AI.

Source: Hindu Businessline

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