Mumbai: When the stock index scales the highest record and the company that made a handsome debut, senior policy makers on Wednesday said India requires strong support from debt capital such as long-term economic loans.
Sanjeev Sanyal’s main economic advisor said the bank had been cleaned now and needed to expand credit quickly to support the economy, emphasizing that the country requires a larger size lender.
The stock market index has broken the previous highest and companies like Zomato have debuted in the stock exchange lately.
“In the end, if you look at economic history, rapid economic growth experiencing a long period of time never happens only with the equity market that finances that growth, ultimately has occurred with debt capital, many of which come from banks,” Sanyal.
The word speaking at the event organized by the non-bank lender group, Grouping FIDC.
Accessing risk capital through equity markets in good condition, he said, pointing many problems by start-ups and other companies.
The debt market also did not do too badly, he said, while underlining the fact that the company’s debt market was less developed.
Sanyal said India requires a banking system that is far greater than what is now, if growth must maintain for decades.
He added that banks must expand their loan activities.
Despite advice, bank credit growth in a low six percent even after ebbing pandemic limitances may be due to lower demand and policy makers already planned to have a ‘loan’ to drive loans.
Sanyal said the banking system had been cleaned in front of the Covid-19 crisis, making India one of the few economies to have a system with the means to support growth.
“We use it well for the banking system in position again to develop again after years of cleaning.
NBFCS (non-banking financial companies) will also be in good condition for the most part,” he said.
He said China also had a rapid expansion in GDP for the past three decades driven by bank balance expansion.
Senior Indian policy makers also said that the impact of downgrading Chinese developers Evergrande on the broader Asian financial market must be seen.
The broader financial system, including credit rating agencies, analysts and media, need to behave in the “responsible” way to let this credit expansion occur, he said.
The credit rating agency did not see the problem coming and when it appeared, they created a massive problem by downgrades which caused a broader problem, he urged.
At the time of the demands of regulations from NBFC growing, Sanyal said “we must be careful not to impose” requirements such as full-scale in such companies that operate due to flexibility.
However, he acknowledged that a large sized classified as an important entity systemically must comply with certain norms.
On the front of the economy, Sanyal assured that there was a higher supervision on the third wave of the third aspect of infection and added that he had reached Kerala.
He said the second wave also first reached one state before spreading and the government would be alert.
Attract attention to fiscal numbers, Sanyal said fiscal resources were there if needed “to encourage accelerator”.
He added that monetary resources are also available to encourage demand because the level is not close to zero in India as in some advanced economies.
After two deep policy cuts in the early weeks of pandemic, the RBI has maintained the status quo at the rate and has been forced to adopt other unconventional steps to encourage growth due to high inflation.
Sanyal said the government had made the world’s largest vaccination drive and added that the process of growth benefits by opening more sectors.
He said that regardless of political pushback on agricultural law, the government had stood on the ground and would see whether the problem was “legitimate concern” and smoothed it.
Equity markets alone cannot maintain growth: Sanjeev Sanyal
