Financial sector growth has been slow: CEA Krishnamurthy Subramanian | Business Standard News

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He said the Budget has made a significant push towards reforming the financial sector and adding vitality to it

CEA Krishnamurthy Subramanian

The country’s financial sector has not really grown as fast as it should have and is “still very, very small”, said Chief Economic Advisor (CEA) Krishnamurthy Subramanian on Friday.

For instance, he said, while India is the fifth largest economy in the world, the largest Indian financial institution — SBI — is ranked 55th in the world. On the other hand, countries which are a mere fraction of India’s size have several of their financial institutions featuring among the top 100 in the world.

He said the Budget has made a significant push towards reforming the financial sector and adding vitality to it. Speaking at the Dun & Bradstreet BFSI & FinTech Summit 2021, the CEA stressed that financial technology can play a significant role in improving both the quantity and the quality of the financial intermediation in the country. Subramanian said while banks are investing in data architecture, “we still have a long way to go” in enabling the kind of data architecture that banks globally employ.

At the same event, Economic Advisory Council to the Prime Minister (EAC-PM) Chairman Bibek Debroy said that while giving the message that tax rates will remain stable, the Budget focussed on promoting growth by driving reforms to boost consumption, investment and government expenditure.

He said real growth comes from four different sources — consumption, investment, government expenditure, and net exports. However, there is a lot of uncertainty surrounding growth in the external sector. “So, the real sector growth has to primarily come about through consumption, investments and government expenditure… One of the messages in this Budget is that tax rates will have stability.”

Observing that FY22 numbers are going to be good because of the base effect, Debroy said, “What is important for us to ask is not what is going to happen in FY22 but what is going to happen from FY23.”

The numbers in FY23 are not going to be that spectacular, he said adding that “but in nominal growth terms, once the effects of the low base are out of the way even in FY23, we will probably get a nominal GDP growth rate of around 11 per cent which again means corporate average corporate profitability of 17-18 per cent.”

Debroy further said the worst of the Covid-19 crisis, economic activity wise, is over, and “we can look forward with some optimism for the economy in general”.

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