Archive · 29 Jul 2026
India's Financial Sector Reforms for Growth
India wants to become a developed country by 2047.
To do this, it needs to use its money better.
Right now, it's hard for businesses to get money to grow because it's expensive.
There have been reports suggesting ways to make it easier, like the Rajan report in 2008.
Some people want big changes fast, while others think it's better to go slow to avoid problems.
The government and big companies sometimes make it hard for small businesses to get money.
The goal is to make money cheaper and easier to use for growth.
India aims to become an advanced economy by 2047, requiring better capital allocation.
The cost of capital for Indian firms is 3-5 percentage points higher than necessary.
Key reports (Rajan 2008, Mor 2014, Mohanty 2015) have outlined financial sector reforms.
Financial inclusion has improved household payments but had less impact on low-income households.
Small business finance progress has been slow due to control by large firms and inefficiencies in public sector banks.
Global capital will play a crucial role in financial sector reforms and economic growth.
- Who
- Indian government, financial sector experts, economists like Raghuram Rajan, Amrita Agarwal, Harsh Vardhan
- What
- Financial sector reforms to lower the cost of capital and improve capital allocation
- When
- Ongoing since 2008, with key reports in 2008, 2014, and 2015
- Where
- India
- Why
- To achieve the goal of making India an advanced economy by 2047 and to finance growth more intelligently
Pro-Reform
Cautious Approach
Reform Pace
Pro-Reform
Advocates for rapid and systemic financial sector reforms to lower the cost of capital and boost economic growth.
Cautious Approach
Supports gradual, cautious reforms to avoid systemic risks and ensure stability in the financial ecosystem.
- Cost of Capital
- 3-5 percentage points higher than necessary for Indian firms
- Key Reports
- Rajan (2008), Mor (2014), Mohanty (2015)
- Financial Inclusion Success
- Significant improvements in household payments and savings opportunities
- Challenges in Small Business Finance
- Slow progress due to supply chain control by large firms and inefficiencies in public sector banks
- Non-Performing Loans
- Crisis around the time of Mor and Mohanty reports
- Global Capital Role
- Crucial for financial sector reforms and economic growth