India's economic history has seen several transitions that have provided a strong foundation and propelled the economy to a higher growth trajectory. From a steady-state average growth of about 3.5% during the early years of industrialisation, India has made rapid progress since the 1990s when the economy was liberalised. This set the stage for new growth avenues and a paradigm change in the economy, making services the principal growth driver for the economy. This was accompanied by the growing aspirations of a rising middle class, the need for infrastructure investment and significant technological innovations. The trends over the last decade have catapulted the Indian economy to be the fastest growing large economy in the world. Today, India is once again at the cusp of a transformation.
In the global context where risks to global growth continue and have led to a significant slowdown across developed and emerging economies, India stands out distinctly on the strength of its domestic economy. Yet, India is not insulated from the impact of global events. Divergent monetary policy trends in developed economies, the slowdown in China, the commodity cycle and geopolitical risks in some regions are critical developments that need to be monitored. However, there are multiple developments underway that are creating new opportunities within the domestic economy. India is today transforming and strengthening its economy through a combination of policy measures and wider participation.
The bedrock of India's long-term potential lies in three key factors that are shaping its future - the demographic profile, the investment opportunity and the technological transformation.
A new class of young ambitious entrepreneurs and a young population amenable to disruptive technological changes is to India's significant advantage. While these long-term strengths are established and are spawning opportunities, to harness the tailwinds, India is augmenting its economic structure to build an efficient and supportive ecosystem.
There are policy changes being initiated to promote transparency, efficiency and ease of doing business. The deregulation of diesel and kerosene prices, e-platform for auction of national resources, introduction of the Insolvency and Bankruptcy Code, 2016, a framework for inflation targeting and the landmark Goods and Services Tax are some of the policy measures that will make the business environment more vibrant.
The changes are not limited to urban India; the rural economy too is undergoing a transformation, and the challenge of bringing millions into the economic mainstream is being addressed. The government's Pradhan Mantri Jan-Dhan Yojana launched in August 2014 has provided an important platform to deepen financial inclusion with over 220 million savings bank accounts opened by unbanked and under-banked people in a short span of time. Combining the strengths of three factors, Jan-Dhan, Aadhaar (the unique ID) and Mobile, the JAM trinity is a powerful combined initiative that will prevent leakages and ensure efficient targeting of beneficiaries as they transact on their mobiles and get subsidies directly into their accounts. Efforts are also being broadened to offer insurance and pensions on a very large scale at affordable premiums, thus promoting a culture of financial savings and risk mitigation.
The change that India is going through is transformational and more so because of the wider participation in this change through involvement of state governments, citizens and external stakeholders. Changing mindsets, growing local business opportunities and the ability to adopt and adapt to changes will create a favourable environment for prosperity and will strengthen India's position in the global economic order.
Chanda Kochhar is the MD & CEO of ICICI Bank Limited.