Experts Explain How India's Financial Industry Can Uplift Economy

One of the essential components of the Indian economy is the financial services sector. Back in 2016–17, it contributed 9.2 per cent of all external trade and 5.8 per cent of gross value added

In terms of operations, banks control the majority of the sector, but the financial intermediary industry accounts for 65 per cent of all employment.

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India's banking system has suffered numerous difficulties in recent years, including a significant, unfavorable, and ongoing lending to GDP gap since 2012. Post-globalisation, there has been a paradigm shift in the nation's job situation. The new economy is service- and technology-driven, in contrast to the pre-liberalisation economy, which was defined by huge manufacturing companies and public sector organisations.

One of the essential components of the Indian economy is the financial services sector. Back in 2016–17, it contributed 9.2 per cent of all external trade and 5.8 per cent of gross value added.

Commercial banks, investment banks, development finance organisations, non-banking financial institutions, insurance firms, hedge funds, credit card issuers, consumer finance companies, accounting firms, brokerage firms, co-ops, mutual funds, new payment banks, small finance banks, etc. are all included in this sector.

In terms of operations, banks control the majority of the sector, but the financial intermediary industry accounts for 65 per cent of all employment. About 13 lakh people work in the banking sector, which has a nearly 25 per cent share. Almost 2 lakh people work in the insurance sector.

The financial sector is essential to the expansion of the Indian economy. On this Vittal Ramakrishna, Founder at POD World said, “The Indian financial industry must look at bringing in measures to curtail the rising inflation. They should start looking at more investment opportunities within the SME sector and at those markets that will boost the Indian economy from within. The dependency on the Western World should be reduced and the measures taken must be in a way which could boost production from within the Indian Economy. It’s imperative to strengthen markets that can increase the overall GDP and thus reduce the debt taken from the western world. Also, there is immense scope in tier 2 and tier 3 cities that the financial industry can tap into. New sectors and emerging markets from the smaller cities could be boosted by the local state governments. Also, local authorities must also step in to solve the challenges that these industries face in order to accelerate growth. This could bring up a new set of activities that in turn add to the economic growth of the country”

A lot of sectors have played major roles in the progress of the Indian economy, but the financial industry or Fintech has been pivotal in the rapid advancement in the past few years, said Kishore Ganji at Astir Ventures.

“The most well-known development that has traversed beyond the corporate jungle deep into the villages of our nation is the acceptance and usage of digital payments. Digital payments have completely transformed the entire cash landscape, even the other day while passing by a remote village near Kakinada, I had tender coconuts and the vendor had a UPI QR code ready for payments. It's truly remarkable to see how far we have come in such a short time. This as an indirect ripple effect has paved way for multiple other aided financial services to seep into the wider population beyond tier-2 cities,” he said.

Thousands of vendors in remote locations can avail formally structured micro-loans as opposed to the earlier available unstructured loans with unreasonable interest. Another effect of the fintech revolution here is the advancement of peer-to-peer lending. Although still on the rise and yet to reach the peak of digital payments; P2P lending is just on the crux to facilitate yet another widespread change in the Indian economy, he added.

When we talk about the Indian economy and the future of the start-up environment as a whole. We are positive towards the outlook for start-ups in India in the upcoming fiscal year and India’s burgeoning startup industry as a whole will continue to collectively contribute to the growth of the Indian economy, said Kanav Kalia, chief marketing officer, Oxane Partners.