Financial Sectors in India
Finance and insurance are two of the most important and essential sectors of our economy. In the US, the main sectors are insurance and banking, while in India, the biggest are financial institutions. But, these are just the tip of the iceberg. The following discussion will highlight the other vital but neglected sectors of the economy.
Banks are one of the financial sectors that have witnessed a vast upswing in terms of their presence in the economy. A significant portion of the gross domestic product (GDP) comes from finance and banking. It is no wonder then that the two have become the pillars of the Indian economy. The number of banks in the Indian system is also in the rise, which further signifies their importance as far as monetary activities are concerned.
The financial systems in the developed countries have developed certain characteristics that make them unique. For starters, financial systems typically focus on providing services to a particular segment of the society. Hence, the top financial institutions of developed countries such as US, UK, Japan, and Australia focus on service provision to the business sector. At the same time, financial systems focus on the creation of demand in the domestic market.
Financial reforms are necessary to maintain the dynamism of these markets. However, such reforms should not come too late. Recent financial sector reforms in the United States, Canada, and Japan have had a major impact on emerging markets. These reforms allowed banks in these emerging markets to serve the domestic market more effectively and even specialize in different segments of the market. This helped these emerging markets to develop more dynamic finance and monetary systems.
Digital Waves developing economies are waiting for the next step by the international financial sector reform. The last few years have seen many reforms that affected all the large financial sectors of developing economies. For instance, in India, the government allowed big lenders to write off some bad debts by reducing the total amount owed by the borrower. This move benefited both the lenders and borrowers in that each side was able to benefit from the relaxation that the governments offered.
In the context of stock market industries, one of the recent reforms that had a profound effect on stock markets was the reduction in the regulation of financial sectors. Although, this did not affect the domestic market sectors much, there was a marked negative effect on the stock markets of many emerging markets. Many stock markets in the developing countries fell considerably in terms of prices. This was mainly due to the fact that some industries became unprofitable due to lack of proper regulation, while others continued to face excessive risks despite being profitable.
This situation prompted several international mutual funds companies to launch import funds, or MIF, into India. These mutual funds were able to raise a significant amount of money that was required for both domestic and private sector investment. This helped Indian stocks and property market sectors to improve significantly, as companies started to invest more in the domestic economy to increase their cash flows.
Digital Waves mentioned trends are just a few of the changes that took place in the Indian economy due to these reforms. There are several other factors that could affect the Indian economy, including the global outlook, the structure of the economy, and the policies of the government. However, none of these factors can make up for the loss of financial sector jobs. Overall, this decline affected the stock market sectors to a great extent, but the impact of the recession will still be felt for years to come.