NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, August 6, 2015

India’s per capita GDP is estimated to have exceeded $1,600 in 2014, which I expect to touch a level of $2,000 by the end of 2016.

I consider this as a threshold level of per capita income, after which the economy grows multifold in a short span of time as the consumption structure upgrades dramatically.

China’s palpable dominance in the global economy is a brilliant example of this phenomenon.

The Indian economy is poised for an orbit-changing growth over the next two decades. A nominal growth rate of 12 per cent annually will catapult India to a $20-trillion size in less than 20 years, and subsequently lift India’s share in world economy to 8.5-9.0 per cent from 2.7 per cent currently.

The banking system will undoubtedly have to play the protagonist role in this transformation.

Not only are we going to witness a sustained rise in banking assets, but we will also see an increasing sophistication of products and solutions, banking of the ‘unbanked’ and rapid consolidation in the sector — in short, a ‘life-cycle transformation’!

In order to remain a relevant partner in India’s growth, Indian banks need to embrace the mantra of ‘Inclusive Growth’ and ‘Creative Destruction via Innovation’ in order to cope with the growing needs of the economy.

With emerging needs in the sphere of urbanisation, industrialisation, digitisation, education, financial inclusion, and global integration, as envisioned by the government, I believe the following 10 developments will shape the banking industry in India’s journey towards a $20 trillion economy.