Narendra Modi Government: World leaders embrace India

New Delhi,Rana Kapoor: If India needed anything in 2014, it was a big bang disruption in its engagement with the world. We needed a man to lead and market India to the world. The world witnessed the biggest democratic election in its history when India voted Prime Minister Narendra Modi to power in 2014. Abe to Abbot, Obama to Cameron, Merkel to Hasina, world leaders have embraced the India which Modi represents. Never before since the time of Prime Minister Jawaharlal Nehru, has India occupied such a central stage in world politics as it does today – indeed a stratospheric shift.

The outturn of anticipated macroeconomic improvements, should prove to be salutary for the Indian banking sector, which has been weighed under the pressure of rising stressed assets especially in the infrastructure sector. The economic turnaround accompanied by recent policy intiatives (to de-bottleneck projects stuck for want of approvals) along with the Reserve Bank of India’s efforts (to provide banks the flexibility to restructure infrastructure loans and incentivise raising long term funds) should allow incremental mending of Indian banks’ balance sheets. This, amid proposed phased reduction in government’s stakes in the banks to 52% would be positive for the undercapitalised public sector banks enabling them to better respond to the credit needs of the growing economy.

Further, the recently launched flagship initiative of ‘Pradhan Mantri Jan Dhan Scheme’ aims to create the platform for universal access to banking facilities for the unbanked, which could prove to be a game changer for India’s financial landscape. Likewise, government’s emphasis on digitisation of financial services and the emergence of new age “mobile banking” are expected to open up new avenues for cost effectiveness and outreach of the banking sector in India. A combination of these demand-supply dynamics are likely to place India’s banking sector on a stronger footing, which will be critical to assist and finance India’s next wave of economic growth.

Owing to these factors, India has re-emerged as an attractive destination for foreign capital. So far in 2014, India has received more than $42 billion of foreign flows with rupee being relatively stable in comparison to its emerging market counterparts despite a resurgent greenback.The government’s measures at reining in food inflation and RBI’s anti-inflationary stance have allowed a dramatic decline in structural drivers of inflation. Further, efforts at improving the growth potential have benefitted from the providential decline in global commodity prices, in particular oil. Oil prices have seen a dramatic decline of over 45% over the last five months significantly altering the risk matrix for India. Not only has correction in commodity prices hastened the pace of decline in inflation, it has improved external sector dynamics, provided much needed succor on the fiscal front (read fuel subsidies which are India’s Achilles’ heel) while creating space for monetary easing.

The author is the managing director and CEO of YES Bank

Posted by on December 29, 2014. Filed under Nation. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.