India Post News Service

NEW YORK: India will make financial services its next growth engine, and to that extent, the government intends to make Mumbai an International Financial Center, said India's Finance Minister P. Chidambaram while addressing the ICICI Securities Annual Investor Conference in New York City on Oct 18.

The minister informed the elite gathering that a recent report has estimated the value of the financial services currently being purchased by India at $13 billion a year and has concluded that this will rise to $48 billion by the year 2015. "While India will continue to be a purchaser of financial services, we believe that there is an opportunity for India to become a provider of financial services as well," he said, adding in that context, his government intends to make financial services the next growth engine for India.

The stock market movement in India, Chidambaram said, is comparable to the movement in most emerging markets and has been doing significantly better than Dow Jones or the NASDAQ."Market capitalization (December 2006) was at $820 billion, making the Indian securities market the 6th largest in the Asia Pacific region after Japan, China, Hong Kong, Australia and Korea," Chidambaram said.

"In fact, the market capitalization of listed securities exceeds the aggregate deposits with the banking system in India. The current market capitalization is $1450 billion on the Bombay Stock Exchange. The Indian financial markets have played a vital role in consolidating and accelerating the growth momentum, the minister said. "There is still a belief in some sections of society - especially in developing countries like India - that capital markets are tools of the rich often used to enhance their wealth at the cost of the poor," he explained.

"If capital markets are not organized on sound principles and are not well regulated, there is indeed the danger that gullible investors could fall prey to manipulation and scams. Every country in the world has had its share of scandals - we had ours in 1992 and 2001 -- and our experience only underscores the need for a well regulated capital market.

"The securities markets in India have made enormous progress in developing sophisticated instruments and modern market mechanisms. However, the real strength of the Indian securities market lies in the quality of regulation, Chidambaram observed. "We believe that the Indian securities market is among the best regulated in the world today," he said.While the India growth story is broad based, not every business in India has been a gainer in the country's growth story, Chidambaram said.

"Nevertheless, I can say with confidence that the gainers in India's growth story have outnumbered the losers. Who has lost and who has gained? Family owned businesses that opposed the policies of liberalization have lost; businesses that embraced liberalization and globalization have gained. Industries that were sheltered behind licenses and tariff walls have lost; industries that were prepared for competition and raised their efficiencies have gained."

"Entrepreneurs who relied on their own capital and skills and were content to remain small have lost; entrepreneurs, who brought in professional managers, boldly accessed the capital market and introduced new products and services have gained. Above all, sectors of the economy that were thrown open to the private sector and to real competition - such as banking, insurance, information technology, telecommunication and aviation - have gained tremendously; sectors that are still closed or only partially open - such as mining and distribution of power - have lagged behind and huge wealth is locked in a few companies."

The Finance Minister said that India recognizes that it is one among a hundred destinations where a foreign company can make an investment. "The investor will naturally weigh the opportunities and the risks. It is now widely accepted that India is a vibrant democracy, that its economy is increasingly open, and that it is a country governed by the rule of law. I can assure you that none of this will change - not now, not in the near term, and in fact, never.

If there are any changes, they will be changes for the better and towards a more open and competitive economy," he said to much applause. Chidambaram further said growth was imperative for India. "Without growth, we cannot address the age old problems of poverty, ignorance and disease.

It is growth that has thrown up the resources to spend more on education and health; to build a huge network of roads; to provide telephone connectivity; to take electricity and clean drinking water to the villages of India; and to make the capital investments that will sustain the high rate of growth," he said.. "Every day we add a new line to our growth story.

Undoubtedly, it will take us some more years to write the full story but, when that story is fully written, India will be the fourth largest economy in the world. I welcome you to share the challenge and opportunity that is India today," he concluded.