Elongating Credit Cycle Important for Longer Economic Growth Cycle: Dr V Anantha Nageswaran

Addressing the CII Annual Session 2023 in New Delhi today, Dr V Anantha Nageswaran, Chief Economic Advisor, Government of India, emphasized the importance of elongating the current credit cycle for a longer economic growth cycle. Sharing his views on the role of the financial sector in creating a competitive economy, Dr Nageswaran highlighted three important aspects. He said that energy is the single-most important driver of the economy and energy security is coming under pressure. He emphasised that banks should not only focus on climate mitigation but should also fund climate adaptation. Dr Nageswaran stressed on the importance of continued funding to the fossil fuels sector, even as we move towards a better balance of renewables in the energy mix. This, he said, was necessary to not jeopardize growth. He further advised that financial institutions should look at overall environmental costs while evaluating green projects.

He was addressing the session on Building a Robust Financial Sector for a Competitive Economy. The other panellists at the session included Mr Leo Puri, Chairman of South & South East Asia, JP Morgan Chase, Mr Sivasubramaniam Ramann, CMD, SIDBI, Ms Kaku Nakhate, President and Country Head — India, Bank of America.

Deliberating on deepening the capital markets, panellists opined that this was important to fund India’s growth, including start-ups, especially in the wake of the interest rate differential between India and developed countries coming down. This could be achieved by broad basing the institutional investor base and allowing banks to hold different kinds of assets, alongside building appropriate risk management mechanisms.

The speakers also opined that the Account Aggregator framework, digitisation and availability of GST and income tax data, will help improve the flow of affordable credit to Micro and Small Enterprises (MSEs). Government schemes such as the Fund of Funds are catalysing domestic capital. Under the scheme, SIDBI has committed Rs 9,000 crores to 110 Alternative Investment Funds (AIFs), which have lent to 950 start-ups, with AIFs bringing in four times the capital, a large part of which is domestic.

Sharing their views on the biggest opportunities for the financial sector going forward, experts expressed that sustainability financing needs arising out of India’s net zero target by 2070 are a big opportunity. India could also look at creating a longevity centre at the GIFT city to cater to the financial needs of a growing global ageing population and silver entrepreneurship.

On the issue of privatisation of public sector banks, experts shared multiple ways by which the impact desired out of privatization can be achieved. One is to continue to expand the role of the private sector. The other is to bring about governance reforms in public sector banks to make them as efficient as private sector banks.


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