Saving and Investment in the Indian Long-term Growth: Perspectives and Challenges for the Financial Sector

The integration of the Indian economy with the world economy from the 1990s onwards led to the rapid growth of the Indian GDP (7% to 9% per annum). This was necessary to empower the large numbers of the Indian population still floundering in abject poverty to improve their lot. The gradual nature of the reforms, including in the financial sector, enabled India to confront the 2008 financial crisis and the current euro crisis under relatively stable conditions. This, however, should not mask the existence of important structural imbalances – public deficit, poverty, marginal financial inclusion, low agricultural productivity and problematic infrastructure financing – which can hinder rapid growth in the absence of further financial reforms.