India’s GDP Growth Depends on Banks
If India’s economy grows at an annual average of 11.6 per cent during the next six years, the country’s GDP could reach $5 trillion by 2026-27, showed an estimate by CARE Ratings. While the growth of 11.6 per cent seems highly optimistic at this time as the coronavirus pandemic has led to disrupt
Published -
Oct 26, 2020 10:14 PM
If India’s economy grows at an annual average of 11.6 per cent during the next six years, the country’s GDP could reach $5 trillion by 2026-27, showed an estimate by CARE Ratings. While the growth of 11.6 per cent seems highly optimistic at this time as the coronavirus pandemic has led to disruptions in almost all the corners of the economy, the inherent potential of the Indian economy remains sound. It is expected that the path of India’s economic recovery will be dependent on how the country manages its infrastructure investment. The rating agency said that the fresh investments required to make the economy achieve the $5 trillion goal would amount to nearly Rs 500 lakh crores over the 7 year period 2021 to 2027. While a part of this investment would be borne by the central and state governments combined, the main enabler will be the financial sector such as banks, debt capital markets, and foreign capital. However, the quantum of investment is likely to remain highly dependent on the ability of the financial system to generate resources. In recent years, Indian banks are struggling with the stressed assets and higher provisioning amount kept aside to compensate for the loss. The phenomenon has reduced the capital base of banks, harming their ability to lend. Adding to the woes, it is also difficult for the banks to make the large investment required for infrastructure creation as the duration of such borrowings are long. Therefore, markets are required to play an important role here, Care Ratings said.
Tags : News/Views Investment economy GDP Government bank Disruption Foreign Capital