Financial development is part of the private sector development strategy to stimulate economic growth and reduce poverty. overcoming “costs” incurred in the financial system. This process of reducing costs of acquiring information, enforcing contracts, and executing transactions results in the emergence of financial contracts, intermediaries, and markets. Different types and combinations of information, transaction, and enforcement costs in conjunction with different regulatory, legal and tax systems have motivated distinct forms of contracts, intermediaries and markets across countries in different times. Financial development means some improvements in producing information about possible investments and allocating capital, monitoring firms and exerting corporate governance, trading, diversification, and management of risk, mobilization and pooling of savings, easing the exchange of goods and services. These financial functions affect savings and investment decisions, and technological innovations and hence economic growth.
Growth Of Financial Sector In India:
The growth of financial sector in India at present is nearly 8.5% per year. The rise in the growth rate suggests the growth of the economy. The financial policies and the monetary policies are able to sustain a stable growth rate. The reforms pertaining to the monetary policies and the microeconomic policies over the last few years has influenced the Indian economy to the core. The major step towards opening up of the financial market further was the nullification of the regulations restricting the growth of the financial sector in India. To maintain such a growth for a long term the inflation has to come down further. The financial sector in India had an overall growth of 15%, which has exhibited stability over the last few years although several other markets across the Asian region were going through a turn oil. The development of the system pertaining to the financial sector was the key to the growth of the same. With the opening of the financial market variety of products and services were introduced to suit the need of the customer. The Reserve Bank of India (RBI) played a dynamic role in the growth of the financial sector of India.
Growth Of The Banking Sector In India:
The banking system in India is the most extensive. The total asset value of the entire banking sector in India is nearly US$ 270 billion. The total deposits is nearly US$ 220 billion. Banking sector in India has been transformed completely. Presently the latest inclusions such as Internet banking and Core banking have made banking operations more user friendly and easy.
Growth Of The Capital Market In India:
· The ratio of the transaction was increased with the share ratio and deposit system.
· The removal of the pliable but ill-used forward trading mechanism.
· The introduction of infotech systems in the National Stock Exchange (NSE) in order to cater to the various investors in different locations.
· Privatization of stock exchanges.
Growth In The Insurance Sector In India:
· With the opening of the market, foreign and private Indian players are keen to convert untapped market potential into opportunities by providing tailor-made products.
· The insurance market is filled up with new players which has led to the introduction of several innovative insurance based products, value add-ons, and services. Many foreign companies have also entered the arena such as Tokio Marine, Aviva, Allianz, Lombard General, AMP, New York Life, Standard Life, AIG, and Sun Life.
· The competition among the companies has led to aggressive marketing, and distribution techniques.
· The active part of the Insurance Regulatory and Development Authority (IRDA) as a regulatory body has provided to the development of the sector.
Growth Of The Venture Capital Market In India:
· The venture capital sector in India is one of the most active in the financial sector inspite of the hindrances by the external set up.
· Presently in India there are around 34 national and 2 international SEBI registered venture capital funds.
World Financial Situation 2019:
Global growth is expected to remain at 3.0 per cent in 2019 and 2020, however, the steady pace of expansion in the global economy masks an increase in downside risks that could potentially exacerbate development challenges in many parts of the world, according to the World Economic Situation and Prospects 2019. The global economy is facing a confluence of risks, which could severely disrupt economic activity and inflict significant damage on longer-term development prospects. These risks include an escalation of trade disputes, an abrupt tightening of global financial conditions, and intensifying climate risks. In many developed countries, growth rates have risen close to their potential, while unemployment rates have dropped to historical lows. Among the developing economies, the East and South Asia regions remain on a relatively strong growth trajectory, amid robust domestic demand conditions. Beneath the strong global headline figures, however, economic progress has been highly uneven across regions. Despite an improvement in growth prospects at the global level, several large developing countries saw a decline in per capita income in 2018. Even among the economies that are experiencing strong per capita income growth, economic activity is often driven by core industrial and urban regions, leaving peripheral and rural areas behind. While economic activity in the commodity-exporting countries, notably fuel exporters, is gradually recovering, growth remains susceptible to volatile commodity prices. For these economies, the sharp drop in global commodity prices in 2014/15 has continued to weigh on fiscal and external balances, while leaving a legacy of higher levels of debt.