India has said its growth story, steered mainly by IT and telecom so far, will shift gear towards financial services to drive expansion.
“It is our intention to make financial services the next growth engine for India,” Finance Minister P Chidambaram said at ICICI Securities Investor Conference in New York on Thursday.
As the economy becomes more open and trade intensity increases big financial flows would be intermediated in India, he said.
Pointing out that India is a purchaser of international financial services, he said there is an opportunity for India to become a provider of these services as well.
He cited a recent report to state that these services were valued at USD 13 billion a year and would rise to USD 48 billion by 2015.
A government constituted committee had earlier this year submitted its recommendations on making Mumbai an International financial centre.
“It is, therefore, our intention to make Mumbai an International Financial Centre,” he said, adding the report is in the public domain and the process of building a consensus on the key recommendations is on.
Pointing out that outlook for the Indian economy is positive, Chidambaram said the factors that are driving the current growth are domestic consumption, rise in investment, increase in employment and increase in productivity of both labour and capital.
“I do not foresee any change for the worse in these factors. While there are some risks such as crude oil prices and commodity prices, we are confident that we would be able to manage these risks without hurting the process of growth,” he said.
He added that different governments have steered reforms through the past 16 years. The policy and practices have yielded the results.
Since 1991, both foreign institutional investment and foreign direct investment have recorded a sustained and secular rise, he said.
As of September 30 this year, Chidambaram said cumulative FII investments stood at USD 63.63 billion. This calendar year alone brought FII investment of USD 13.21 billion.
Likewise, cumulative FDI as on June 30 this year has been USD 59.54 billion and this calendar year the inflow is to the tune of USD 11.29 billion, he added.
Given the the current exchange rate, India is a trillion-dollar economy, he said, adding, outflows and inflows together account for nearly 106 per cent of GDP.