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Trillion-dollar economy - EY - India

Trillion-dollar economy: Opportunities and challenges for banks

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The Indian economy is poised to grow robustly at 8%-9% over the next decade. However, if social-development efforts are not initiated and ramped up, there could be rising inequality and a slowdown.

This report aims to identify issues and aspects connected with economic growth and social development, the implications for the banking sector, and ways and means of furthering financial inclusion.

According to the UNDP Human Development Report 2010, India ranks 119 in terms of human development, with a Gini Coefficient of 36.8. As much as 41.6% of the population subsists on less than US$1.25 a day in PPP terms, and 28.6% of the population lives below the national poverty line. In comparison, China ranks 89, with a Gini coefficient of 41.5. However, China’s population living on less than US$ 1.25 a day totals only 15.9% and those living below the poverty line amounts to 2.8%.

Education, health and gender inequality, among many other indices, paint the same picture.

The solution lies in economic growth being more participative and equitable.

Increased efforts, requiring sustained reforms, have to be made toward social-development goals to sustain economic growth and make it more equitable.

Banks are experimenting with various initiatives for furthering financial inclusion

However, they have not been able to make a significant impact, given the magnitude of difficulties in reaching the excluded population due to lack of rural infrastructure, customer illiteracy and the widespread inability of customers to save.

Many of the initiatives lack adequate understanding of the customer and are focused on covering the individual without actually helping the customer generate income or effectively perform economic activities, thus driving them to withdraw from the inclusion net.

This report attempts to outline a two-pronged approach based on economic activity. Download this report for a detailed analysis.

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