The Economic Survey for 2024 highlights the pivotal role of India’s banking and financial sectors in driving economic growth and promoting financial inclusion. This year’s survey underscores the impressive performance of these sectors, showcasing their effectiveness in mobilizing funds and contributing to the overall stability and expansion of the economy.
The survey reports robust growth in bank credit, with both gross and net non-performing assets (NPAs) reaching multi-year lows. This positive trend signifies a successful implementation of policies aimed at strengthening the banking sector. “The improvement in bank asset quality reflects the successful execution of policies designed to enhance the sector’s stability and efficiency,” the survey notes. This indicates a commitment to maintaining a healthy and resilient banking system that can support economic progress.
In addition to advancements in the banking sector, primary capital markets have played a crucial role in capital formation. During the fiscal year 2024 (FY24), these markets facilitated capital formation amounting to Rs 10.9 lakh crore, which represents approximately 29% of the gross fixed capital formation of private and public corporates during FY23. This substantial contribution highlights the importance of capital markets in fostering economic development and enabling businesses to expand and invest.
Another significant achievement detailed in the survey is the surge in the market capitalization of the Indian stock market. The market capitalization to GDP ratio has now reached the fifth-largest level globally, underscoring the strength and growth of India’s financial markets. This notable increase reflects investor confidence and the expanding role of the Indian stock market in the global financial landscape.
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The survey also emphasizes the comprehensive strategy adopted for financial inclusion. This strategy encompasses a target-based approach, market development, infrastructure strengthening, innovation, technology adoption, last-mile delivery, consumer protection, and financial literacy. The increased use of accounts for direct benefit transfer (DBT) flows and the promotion of digital payments through RuPay cards and the Unified Payments Interface (UPI) are highlighted as key aspects of this strategy. These efforts aim to enhance access to financial services and integrate more people into the formal financial system.
However, the survey also provides a cautionary note. It emphasizes the need for commercial banks and insurance companies to balance their market penetration efforts with the imperative to address financial literacy, avoid over-lending, and prevent mis-selling. Ensuring that financial institutions address customer grievances effectively is essential for maintaining a healthy financial cycle and fostering trust within the sector.
As India’s financial sector undergoes a critical transformation, the survey stresses the importance of remaining vigilant against potential vulnerabilities, whether they arise from global economic shifts or local challenges. The government and regulatory bodies must stay agile and prepared to implement necessary policy and regulatory measures to safeguard the stability and integrity of the financial system.
In conclusion, the Economic Survey for 2024 paints a positive picture of India’s banking and financial sectors, highlighting their significant contributions to economic growth and financial inclusion. The survey acknowledges the progress made while also addressing areas requiring ongoing attention to ensure the continued health and stability of the financial sector. As India navigates its economic journey, maintaining a balanced approach and proactive measures will be crucial for sustaining growth and resilience in the face of evolving challenges.
