The Indian economy is now considered the fastest growing economies in the world. Contributing to its high growth are many critical sectors, amongst which ‘financial services sector’ is unarguably one of the most distinguished sectors of Indian economy. However the contribution of financial sector to GDP is around 6% as of FY2016-17, quiet low as compared to other developed and developing economies.
The Government has taken many reformative steps over the last few years to make financial sector even more popular, inclusive and robust. These reforms will rewrite a chapter in Indian economy and further contribute to revenue and employment generation for the economy. In terms of the demographics, India is expected to become one of the most populous nations by 2025, with around 1.4 billion people. The country’s population pyramid is expected to bulge across the 15–64 age bracket, increasing the working age population from approximately 761 million to 869 million. Also, in this period, India is poised to become the world’s youngest country, with an average age of 29 years, and account for around 28% of the world’s workforce. On an average, 15 million youths will join the workforce every year, for the next 20 years which gives India a unique competitive advantage, but would also be its biggest challenge. The recent Government initiatives in the financial sector covering formal banking like Digital India, Jan Dhan Yojana and Direct benefit transfers, insurance schemes PM Suraksha Bima Yojana, Agri Insurance, and micro-finance MUDRA scheme are all aimed towards creating a wider base of formal financial services sector. The increasing penetration of mobile usage with increasing access to internet has helped creating awareness in financial sector. It is not limited to the traditional banks, but the scope is widened to cover stocks, mutual funds, insurance, micro finance etc.
The current digital revolution will lay the foundation for a more comprehensive and all-encompassing economic inter linkages than anything we have ever seen. While the impending change holds great promise, the patterns of consumption, production and employment created by it also pose major challenges requiring proactive adaptation by corporations, governments and individuals. The twin forces of demographics and technological change will reshape the financial sector of the Indian economy. There will be a dire need for trained and certified intermediaries to absorb the requirements of the growing market.
Domestic financial services can generate around 50 lakh new jobs in the next ten years. Additionally, the launch of the Gujarat International Finance Tec-City (GIFT City) as “India’s Global Financial Hub” with an estimated project cost of US$ 11 billion will foster the growth of global financial ecosystem. This initiative to promote a state-of-the-art international financial services facility would boost the fintech revolution in India. The IFSC would cater to India’s large potential in financial services by offering firms world-class infrastructure and provide 20 lakh direct front-end jobs in the next ten years. There will also be an equal number of indirect and backend jobs. Overall, it is my view that financial services can become a next driver of employment growth and propel India to be next finance hub.
In the global markets, the contribution of finance as the future driver of growth and employment, would assume increased importance like what software services has achieved. Influenced by rise of global interconnected markets, massive advances in technology and changes in investment landscape, the finance function is more than the support function it used be. Now, banks and financial institutions are rapidly adopting a new generation of Artificial Intelligence-enabled technology (AI) to automate financial tasks like operations, wealth management, algorithmic trading and risk management. This would mean creation of a new class of highly skilled individuals trained in application of AI / data science to various aspects of finance from designing of products, trading decision making tools, investment recommendations, risk management, surveillance methods just to list a few. India has the potential to create financially literate experts working for the world markets like what happened in the software industry. These jobs would not be limited to the back office processes but increasingly contribute to the front office jobs. In the next 10 years India can create another 20 to 30 lakh front end jobs in international financial markets.
Ashish Kumar Chauhan, MD & CEO, Bombay Stock Exchange, writes this piece for the latest edition of FICCI’s Financial Foresights. Post continues on Page 2.