Emergence of Developing Economies

Over the last few decades, the global economy has witnessed the emergence of developing economies. There has been increased global integration and financial innovation. Different economies in the world are getting interrelated, interconnected and integrated. This factor when coupled with Technical innovation which includes internet, mobility, etc. is helping the global economy grow at a reasonable pace.

Read on GWI Why we think India will be the Best Performing BRIC Country in 2013.

Emergence of Financial Services

Growth in emerging economies like India has been fast in the last decade, as compared to the growth in the developed economies. This has resulted in a surging demand for goods and services which also includes financial services. A report from World Bank indicated that over 150 million new customers are being added in financial services sector every year, until the recession showed its ill effects on the global economy.

Effect of Global Crisis on Financial Services

The global economy crisis definitely has been a learning experience for the people linked with the market. It definitely has taught the importance of financial literacy and appropriate framework for investors’ protection. There has been a drastic change in the regulatory reforms in India. Stringent rules have been passed, policies have been formulated and of course several steps have been taken by the regulatory body (IRDA, SEBI, RBI, etc.) in India to safeguard investors (mainly retail) sentiments.

Keeping in mind the goal of financial innovation, regulations are being made so that no stakeholder suffers in the long term. Steps are being taken to provide adequate information to the investors about the risk and return associated with the products. Addressing investors’ grievance has become one of the key areas of focus for sustainable long term economic growth and financial stability in countries like India.

Reasons for rise in the Financial Services

With the advent of foreign players, there has been rise in employment, growth. This has resulted in improving the living standard for the individuals. Rising income levels has resulted in a rising demand for financial services. This rising demand has definitely driven financial innovation leading to creation of several products and services to meet the varied needs of investors.

Given the fact the India has a huge crowd of young population which is growing at a rapid pace, future generations are likely to be inclined towards products linked with market. Unlike the conservative and traditional investment made by parents in the past, a considerable shift has been witnessed in the current generation. The risk taking ability has increased manifold and investment in products like Derivatives etc. is on rising spree.

Read about Mutual Fund Companies in India.

Thus in such scenario, it is imperative that government along with the financial services industry as a whole join hands to work together. This will ensure that investors make investment after proper due diligence. This will definitely result in improving satisfied investor base, who has the ability to deal with the market fluctuations.

Financial Services in India

It is expected that India’s GDP will touch the mark of US$ 6 trillion by 2025 and savings flow is expected to rise exponentially. The scenario very well presents an opportunity in expanding the financial services industry. Focus has been rightly shifted on inclusive growth given the fact of country’s large population who are still excluded from the radar of financial services. Thus one of the areas of focus remains the accessibility of services. It is undoubtedly true that in India, physical savings contribute the maximum share to the tune of 50% and financial services penetration is low. Despite improvement in the investment pattern, share of investment in mutual fund as a percentage of GDP still remains low at 14% as compared to developed nations where the ratio is as high as 70%. Financial products such as insurance, mortgage and pension have lower penetration in India as compared to the developed market.

Thus a need for a combined financial awareness and prevention of wrong selling is required to gain investors’ trust in financial products. This will ensure that we are able to realize the full long term goal of the market. A well informed and aware investor base is the need of the hour for a growing economy like India. It will foster the financial stability of the nation.