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Colin Shah
Colin Shah
Shri P.R. Aqeel Ahmed
Shri P.R. Aqeel Ahmed
Dr. Vidya Yeravdekar
Dr. Vidya Yeravdekar
Alok Kirloskar
Alok Kirloskar
Pragati Khare
Pragati Khare
Devang Mody
Devang Mody
Vinay Kalantri
Vinay Kalantri
Varun Aggarwal
Varun Aggarwal
Erich Nesselhauf
Erich Nesselhauf
Ghanshyam Lal Vyas
Ghanshyam Lal Vyas
Mr Siddhartha Sacheti
Mr Siddhartha Sacheti
Satish Kannan
Satish Kannan

Financing for growth and aspiring economy

Financing for growth and aspiring economy

Introduction
The Ministry of Finance conducted a webinar post the announcement of the Union Budget 2022-23 to discuss on the topic financing for growth and aspiring economy for a speedy implementation of the announcements in the Union Budget. Top focus of the budget included PM Gati Shakti, inclusive development, productivity enhancement, sunrise opportunities, energy transition, climate action and financing for investments. Discussions were broadly based on these focused areas with major themes being finance, infrastructure, banking digital economy, climate finance and sunrise sectors. The objective of the session was to engage and channelise domestic financing for accelerating economic growth.

Indian banks & their role in lending
Indian financial system and institutions have always encouraged key developmental initiatives in the country. According to RBI data, commercial banks accounts for 94% of the total non-food credit deployed by all scheduled commercial banks. Non-food credit stood at Rs.115.5 lakh crore (US$ 1.5 trillion) and registered a growth of 8% in February 2022 compared to 6.6% a year ago. Priority sector lending stood at Rs. 4,52,000 crore (US$ 58.8 billion) as of February 2022.

Following table highlight the banks non-food credit growth over last 10 years-

India bank credit -Non-food (Last 10 years)

Financial Year

Non-Food bank credit
(In Rs Crore)

Non-Food bank credit
(In US$ Billion)

Variation-YoY

2011-12

4,530,548

596

16.8%

2012-13

5,164,037

679

14.0%

2013-14

5,895,649

775

14.2%

2014-15

6,442,002

847

9.3%

2015-16

7,144,361

939

10.9%

2016-17

7,787,539

1,024

9.0%

2017-18

8,583,436

1,129

10.2%

2018-19

9,730,112

1,279

13.4%

2019-20

10,319,097

1,357

6.1%

2020-21

10,888,255

1,432

5.5%

2021-22*

11,558,783

1,520

8.8%


# Data as of February 2022; Source: RBI

Projects and programs emphasized for growth
Prime Minister Mr. Narendra Modi highlighted on giving importance to financially viable models on all priority sectors in India. He also emphasised on importance of financial institutions participation for the aspirational growth of the country. Furthermore, he also indicated that centre has tried to accelerate economic growth by way of encouraging capital flows, reducing tax on infrastructure investments and creating institutions like National Investment and Infrastructure Fund (NIIF).

Mr. Modi mentioned following key points in which financial institutions can play a major part for accelerating economic growth:

  • Brainstorming about key projects under Atmanirbhar Bharat Abhiyan and arranging financing in those projects in order to reduce the dependency on other countries in certain areas. One such initiative being the PM Gati Shakti National Master Plan. PM Gati Shakti Program is a mass infrastructure initiative for India’s plan to become a US$ 5 trillion economy.
  • Financing projects under Aspirational District Program, whereby 100 districts which are below the state average is selected and financial institution in the country are invited to prioritise projects under these districts.
  • Increasing development activities in Eastern India which is quite popular for its natural resources.
  • Strengthening financing of MSME sector in which government has already made some fundamental reforms.
  • To get into Industry 4.0 skill development is essential and Mr. Modi emphasised on key pillars like Fintech, Agritech and Meditech where financial institutions can provide their assistance.
  • India can take the position in top three sectors if financial institutions can provide their assistance on 8-10 sectors. Recently, the country has started focusing on drone sector, geospatial sector and space sector and these three sectors can be in top three.
  • New business and start-ups will do well when the entrepreneurship initiatives are strengthened. Finance institutions can consider innovative financing and sustainable risk management of new futuristic ideas and initiatives so that start-ups and companies can expand their product offerings.
  • Exporters in India have different financial needs and financial institutions can help them by announcing products and services suiting their needs. This will help in increasing exports and competitiveness.
  • On the rural front financial inclusion is the main theme and government is already focusing on distributing Kisan credit cards, supporting self-help groups, farmer producer organisations and common service centres
  • Government has already constructed digital roads and improving the digital infrastructure in rural areas by providing broadband connectivity. Financial institutions can promote financial inclusion.
  • The nation is getting ready to become net carbon neutral by 2070, financing institutions can start focusing on green financing as the same is gaining traction across the world.
  • Healthcare is an important sector in the country and government has been increasing infrastructure requirements. But still there is lack of medical institutions and people depend on foreign universities so Mr. Modi urged financial institutions to consider same in their planning.

Recent announcements/developments

  • Pradhan Mantri Mudra Yojana has provided Rs.18.60 lakh crore (US$ 245 billion) loans to 34.42 crore (344 million) beneficiaries over the last seven years, according to the Ministry of Finance.
  • RBI has announced guidelines for scheduled commercial banks in India to open Digital Banking Units (DBU). This is part of the 75 DBU’s announced in the Union Budget 2022-23.
  • Ms. Nirmala Sitharaman, Minister of Finance and Corporate Affairs is expected to meet PSU bank heads where banks would be urged to increase their lending to accelerate the economic growth.
  • Union Bank of India is expected to spend Rs.1,000 crore (US$ 131 million) on digital banking initiative. The bank has recently unveiled a super app ‘Union nxt’ and plans to originate 50% of its business from digital route by FY 2025.

Conclusion
Union Budget 2022-23 has included several steps that will be helpful in maintaining a strong momentum of growth in the future. The budget has programs that will be helpful in building modern infrastructure, encourage private investments, increase digital banking presence and use of green financing. The government has highlighted the role of financing institutions in the country to help them achieve the budget announcements. With financial institutions focused on increasing credit growth, there is ample room to support key projects to further economic growth and development of the country.  

 

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