Banks and Financial Sector Drive Economic Growth: Economic Survey 2024
The Economic Survey released underscores the outstanding performance of India’s banking and financial sectors in FY24, emphasizing their role in mobilizing funds for economic growth and advancing financial inclusion.
The survey reports double-digit and broad-based growth in bank credit, with gross and net non-performing assets (NPAs) at multi-year lows, demonstrating the government's dedication to maintaining a robust and stable banking sector. "The improvement in bank asset quality reflects the effectiveness of policies aimed at strengthening the sector," the survey states.
Primary capital markets significantly contributed to capital formation, amassing ₹10.9 lakh crore during FY24, which accounts for roughly 29% of the gross fixed capital formation of private and public corporates in FY23.
The survey highlights a notable increase in the market capitalization of the Indian stock market, positioning its market capitalization to GDP ratio as the fifth-largest globally. This growth signifies the resilience and strength of India’s financial markets.
India's financial inclusion strategy has been comprehensive, focusing on targeted approaches, market development, infrastructure enhancement, innovation, technology, last-mile delivery, consumer protection, and financial literacy. The survey highlights the increased utilization of accounts for direct benefit transfer (DBT) flows and the promotion of digital payments through RuPay cards and UPI.
Despite these advancements, the survey warns that commercial banks and insurance companies must balance their market expansion efforts with the need to enhance financial literacy, prevent over-lending, and avoid mis-selling. Addressing consumer grievances is crucial to maintaining a healthy financial cycle.
As India’s financial sector undergoes significant transformation, the survey stresses the need for vigilance against potential vulnerabilities, both global and local. The government and regulators must remain agile and ready to employ policy and regulatory measures as needed.