India’s journey of economic transformation, from the liberalisation of 1990 to the emergence of Digital India, is a testament to the resilience and adaptability of the nation. During a conversation with CNBC TV18 on the sidelines of the 30th Lalit Doshi memorial lecture, veteran banker KV Kamath reflected on the milestones that have propelled India’s growth and charted the course for the future.
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India’s economic phases: From reforms to digital revolution
Kamath identified the opening up of the economy in 1990 as the seminal moment that set the stage for India’s transformation. “It took Indian entrepreneurs nearly a decade to adapt to the new environment,” he said, highlighting key policy interventions that followed.
Among them was the reduction in interest rates during the early 2000s, which spurred growth by making home, car, and corporate loans more affordable.
Also read: RBI’s regulatory actions on lending were warranted, says KV Kamath
The period from 2000 to 2008 was marked by rapid growth, bolstered by advancements in infrastructure. While the years that followed saw economic challenges due to policy reversals and global headwinds, Kamath noted that momentum returned post-2014, culminating in the rise of Digital India.
“Post-2018, we have seen a digital revolution,” Kamath said, pointing to the proliferation of over 1,50,000 digital startups as a defining feature of this phase. “India is on its way to becoming a digital society, with technology transforming both corporate leaders and everyday citizens.”
Banking on the future: Competition, technology, and bulking up
Turning to the financial sector, Kamath emphasised the need for India’s banks to “bulk up” to meet the demands of a growing economy projected to reach $8 trillion in the next 5-6 years. “The size of our banks must expand dramatically,” he stated, noting the importance of robust return on equity (ROE) metrics. “Indian banks, with an ROE upwards of 15%, are well-positioned to achieve this without external funding.”
Also read: KV Kamath on what public sector banks need to thrive without privatisation
Kamath also discussed the evolving role of non-banking financial companies (NBFCs) and fintech firms. While banks remain the backbone of retail lending, fintechs and NBFCs are driving technological innovation at a faster pace, pushing traditional banks to adapt.
“This competition is good for everyone,” Kamath said. However, he urged caution regarding regulation, particularly with fintechs aspiring to obtain banking licences. “The regulator’s primary responsibility is deposit safety,” he said, adding that any move to integrate fintechs into the banking system must be carefully timed to avoid risks.
The roadmap to India at 100
As India looks to its centenary, Kamath’s insights provide a blueprint for sustained economic and technological progress. By building on the foundations laid over decades and embracing innovation, India’s financial and entrepreneurial sectors are poised to drive the nation’s ascent on the global stage.
“Keep learning, keep adapting,” Kamath advised, encapsulating the spirit of resilience and forward-thinking that has defined his own journey and India’s economic story.
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