Opening Remarks by the Deputy Managing Director Antoinette M. Sayeh at the Launch of IMF Book on India’s Financial System

IMF News, April 25, 2023

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1991: real per-capita income was just shy of $600.
Today: real per-capita income has more than tripled.
An estimated 400 million people in India have been lifted out of poverty just in the last 15 years.
In purchasing power parity terms, India is the third largest economy in the world.
India is expected to contribute about 15 percent to global growth this year.
1991: India was one of the world’s largest aid recipients; today it is a net donor.
Current role: G20 Presidency with an agenda focusing on global public goods and strengthening international coordination around debt, crypto assets, climate and digitalization.

1990s reforms and developments:
- Increasing role of private sector banks.
- Introduction of universal banking.
- Adoption of international best practices in regulation and supervision.
- Creation of the National Stock Exchange and electronic trading.
Market effects:
- Larger firms increased access to market-based funding through bond and equity markets.
- Households and SMEs rely on banks and nonbank financial companies.
Financial inclusion via public digital infrastructure:
- Wide shift from cash to smartphone-based financial transactions over the past decade.
- Unique biometric-based identifier underpins digital payment architecture.
- Digital payments improved public finance efficiency by eliminating ghost employees and boosting revenue collection from the general sales tax while reducing tax compliance costs for businesses.
- Digital systems expanded distribution of social benefits to previously unreachable populations.

2020–2021: Indian authorities transferred 37 billion dollars in social benefits to people’s bank accounts, avoiding costly intermediaries and reducing leakages.
External shocks faced: Asian financial crisis, global financial crisis, the pandemic, and the war in Ukraine.
Domestic crises and responses:
- 2018: default of systemically important nonbank financial companies.
- Post-2018 reforms: upgraded regulation and supervision, introduction of a regulatory framework for nonbank financial companies.
- Progress on bank recapitalization, corporate debt restructuring, oversight of financial market institutions, and crisis management.

Climate vulnerability:
- India is highly vulnerable to the effects of climate change.
- Recommendation: broaden and deepen the sustainable finance market to support climate mitigation efforts.
Financial innovation:
- Offers opportunities for improved access to financial services for vulnerable populations.
- Presents regulatory and supervisory challenges that require continual upgrading to avoid buildup of risks.

IMF interactions with India:
- Annual Article IV consultations.
- Regular Financial Stability Assessment exercises.
Purpose of thematic analytical work:
- The book provides a comprehensive view of India’s financial sector and analyzes specific financial sector policies to better support India’s growth potential.
- Findings aim to inform policymakers’ reflections and public debate as India charts its future.

Opening Remarks by the Deputy Managing Director Antoinette M. Sayeh at the Launch of IMF Book on India’s Financial System, April 25, 2023.