Considering India’s dominance in various sectors, it’s time India starts claiming its past glory back under the leadership of Prime Minister Narendra Modi as he takes over the Presidency of G-20 nations.
Year 2022 is an auspicious year for India as we completed 75 years of independence and simultaneously India is bestowed with presidency of G-20 nations.
G-20 was formed in 1999 to discuss key issues in the global economy and these countries accounted for 80% of the Gross World Product (GWP), 75% of international trade, 66% of global population and 60% of world land area.
The forum further strengthened post 2008 financial crisis and G-20 declared itself the primary venue for international economic co-operation.
The world is currently grappling with challenges of inflation, high interest rate regime, recession, unemployment, however, growth in Indian economy is offering hope to the rest of the world in a recessionary economic climate.
It would also be most appropriate if India could also provide a market oriented growth model (MOGM) to the rest of the world which is self-sustainable and global. India’s market modernisation started in 1990s and has evolved as a modern market with all asset classes, like, equities, commodities, foreign exchanges, debt market, electricity and gas. However, deepening of Indian market is still to take place in most asset classes and also in its market penetration as may be seen from data.
As India celebrates its pre-eminent political and economic growth potential, home grown MOGM structure will create a world class global financial centre from India which could be a bridge between India, global financial centres and developing countries in Asia, Africa and Latin America. As most would know India accounted for 34% of world GDP in 1000 AD when China was 26.2% of the world economy. When British came to the India in 1775, the size of Indian economy was 24.5 % and China was 22.3%.
Gradually Indian economy was made more agrarian and its GDP came down to 1.7% in 1900s and that of China was 6.2%, whereas UK was 18.5% and USA 23.6%.
India’s market share started gradually increasing post-independence and it now stands at 3.3% which is as much as that of UK. This early period of India dominance is similar to the political and economic dominance of Maurya empire during 322-185 BCE which included surrounding regions around India under the empire.
Considering India’s political leadership now and dominance in various sectors within India and globally, its time India starts claiming its past glory back under the leadership of Prime Minister Narendra Modiji as he takes over the Presidency of G-20 nations.
This economic dominance is possible by establishing India as a global financial centre which enables MOGM for domestic and global markets. India’s International global financial centre (IGFC) should emerge as provider of financial solutions to the region in time zone between UK and Japan.
India will have to nurture and aggregate a market ecosystem for all asset classes with participants from domestic and global players providing solutions to users in India and global markets and users.
While per capita GDP shows average income levels distributed over total population, likewise, market capitalisation shows wealth distribution over the investing population. Therefore, in US, the wealth of over USD 40 trillion (twice of GDP) is accounted by 55% of the population which include promoters, institutional investors and retail population, whereas in India 2.6 trillion USD of wealth is skewedly distributed over 3% of population.
China has 13% of its population participating in markets which has ownership of 12.2 trillion of assets as market capitalisation. Investor participation may be direct in equities or indirect through mutual funds, pension funds and insurance products.
Benefit of Global Financial Centre–As a means to be a global player
Local asset market creates an ecosystem and supply chain which touches many lives domestically whereas the global financial centre networks creates global and local financial supply chain between market ecosystem, users and industry. The market supply chain ecosystem creates products and services, attracts investors, mobilises savings, creates a market for debt and risk management which creates stability and aligns the domestic market with global economy.
Such an ecosystem fuels growth in traditional and sunrise industry of all sizes and types including start-up through a multiplier effect.
The data in the table above shows that only 3 percent of India population has benefited from the growth of our markets as against 55 percent in USA.
India has not pursued a wide-spectrum global financial centre policy though our domestic markets have global participation but it has remained restricted and largely in capital market and not expanded to other asset classes. India has seen large Indian Exchanges like, BSE, NSE, MCX and IEX but these have global potential which has not been allowed due to focus on isolating Indian market except through local companies incorporated in India by global companies.
India has also established global Exchanges like, DGCX (Dubai), SMX (Singapore) and BFX (Bahrain) but these have remained insulated outside India in the absence of cohesive global financial centre strategy or policy.
In last two decades, Indian corporates have shown expertise and technology in establishing these global exchanges which also witnessed some global expansion by Indian intermediaries and service providers.
In order to be a global player with global impact, India needs an integrated domestic and Global financial centre policy even if the capital account convertability restrictions are to be accommodated.
If India has to develop as potential pool of global and domestic funds and also as provider of global capital, then we will need our International Financial Centre which has convenience of global regulatory policy for cross participation in Domestic and global markets for funds and service providers.
This can be achieved during the G-20 presidency of Hon’ble Prime Ministers as a global project from India for harmonisation of global markets under the umbrella of one world market. India has an opportunity for creation of a “Just and Equal” market structure as the basis of market-oriented growth model (MOGM)which harmonises and integrates domestic and global markets. This Global financial centre could accommodate developing countries and also developed countries policies, markets and service providers.
In order to make these goals achievable in one year of G-22 presidency and make an impact globally through a perpetual growth engine of MOGM through India’s Global Financial Centre, following are pre-requisites for success:
a) Acceptable global political leadership – India has under PM’s Leadership
b) Successful business model benchmark – India has demonstrated but needs global scale.
c) Ability to work with local & Global eco-system partners and users – India has selectively demonstrated.
d) Technology integration of market and eco-system – Demonstrated in India and partially outside.
e) Policy and regulatory expertise-selectively demonstrated from global context.
The leadership bestowed on the Prime Minister as head of G20 is a design of destiny in current circumstances for India, G20 nations and rest of the world. India has shown a strong leadership under the regime of our current Prime Minister as the economy and country is moving ahead with a new momentum, ambition, hope and dynamic leadership to achieve these.
India can showcase a home-grown Global Financial Centre ecosystem with a low cost market-oriented growth model (MOGM) which will be a perpetual growth engine interconnecting domestic ecosystem value chain with global ecosystem and adaptable for developing and developed countries.
This multi asset global financial ecosystem will develop new economies of scale and new network within India and globally. This global financial centre will provide pool of funds accessible to global users through new supply chain, ecosystem, investment opportunity, backward and forward supply chain linkages in domestic and global markets.
India should consider the implementation of this “Just and Fair” model under G-20 Presidency of our Hon’ble Prime Minister as a model for masses as against the current high cost and large size centralised market model of developed countries which is inclined in favour of large intermediaries and for accessing large funds.
Jignesh Shah is an innovator and entrepreneur and Chairman Emeritus and Founder, 63 Moons Technologies Limited.