Published Online:August 2024
Product Name:The IUP Journal of Bank Management
Product Type:Article
Product Code:
Author Name:Amaresh Samantaraya and Aleena Jose
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:18
India is aspiring to become a developed nation (Viksit Bharat) by 2047, which requires sustaining annual economic growth rate of 8 to 10% for the next quarter century. Rising domestic savings and investment in India are found to be intimately interlinked with acceleration of economic growth over the decades. The Indian banking sector has played a critical role in mobilization of domestic savings and funding productive investments. This paper analyzes the role of improved banking profitability and productivity during the post-reform period in augmenting domestic savings and investments. However, high loan delinquencies had negative consequences, diminishing banking profitability and causing financial losses for several public sector banks in the late 2010s. To avoid any disruptions to Indian growth prospects, it is essential to avoid recurrences of loan delinquencies going forward. Adoption of innovative and prudential banking practices and regulations is imperative for continuous improvement in profitability and productivity of banks.
India’s per capita income1 increased from 12,493 in 1950-51 to 98,374 in 2022-23, reflecting significant improvement in the standard of living in the country. This helped India leap to lower middle-income country category in 2007 from the previous poor country category, as per World Bank classification. India is now confidently aspiring to become a developed/rich country by 2047, popularly referred to as the Viksit Bharat dream. A quick look at India’s past growth experience suggests that the pace of improvement in economic prosperity was not uniform in the last seven-and-a-half decades. The average growth in per capita income had witnessed nearly threefold hike from 1.5% during 1951-52 to 1979-80 to 4.3% during 1992-93 to 2022- 23. As detailed in the following section, a rise in domestic savings and investment closely tracked the gradual acceleration in economic growth. It was observed that the domestic savings rate jumped from little less than 20% until the late 1980s to nearly 25% during the 1990s, and further soared to nearly 35-38% during the mid-2000s.