30 years of reform. Report card of the Indian financial sector

This article is part of the series 30 Years After: Review and Renew the Reforms Agenda.

Photo by Lucky Trips on Pexels.com

At the heart of the complex web of bits and bytes that is the modern financial system is the ability to exchange and transfer capital (money) between various participants in an economy. Borrowers, lenders, investors and entrepreneurs form the four corners of this very busy square. Traffic flow and participants can either be controlled and owned by the government as it was in India till 1991, or it can be regulated by a set of independent regulators appointed by the government, as it is today in 2021.

When we see the hectic activity in the Indian financial system today, we tend to forget what it was like just 30 years ago — in terms of scale, products, efficiency, cost and service. The sole job of a financial system is to trundle money around to find its optimal use in terms of returns at a low-cost and safety of transactions. But the centrally planned Indian economy used the state-owned financial institutions such as banks and insurance companies to gather household savings for its own use, hard coding this into the reserve ratios in banks and investment guidelines in insurance firms.

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Opinion | While we were not looking, India won some battles

A call from a political party scare-mongered me into checking if my name had indeed been struck off the election list. A visit to the Election Commission site for Delhi told me that all it needed was an SMS to check if my name is on the list—I message at 7738299899, write EPIC space my voter ID number. Thirty seconds later, I get a confirmation that my name is there and it gives me the booth address where I will vote.

After the sheer delight at this super smooth process, I remember that I had got my Provident Fund (PF) balance on SMS too. Also, the passport and visa processes is mostly all automated and keeps us well-informed about the progress of the process. So I began to count what else works in India. We know and are vocally critical about what does not. So what works? Well, the metro network where it exists, as it does in Delhi, is superb. Do we hear of strikes or regular breakdowns in the cities in India they operate in? We don’t. Travel to Europe and see what breakdown of such services means. France especially is constantly on strike.

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