India is transitioning from a nation of savers to investors, according to Uday Kotak, Founder & Director of Kotak Mahindra Bank. The shift began in the early 80s when Indian savers had low confidence in financial assets. They gradually moved to bank deposits, UTI, and LIC. Despite being considered “speculative” in the 90s, companies seeking capital turned to foreign institutional investors (FIIs), who bought into companies while Indian savers stayed away. This led to the private placement market (QIP) in the early 2000s, allowing FIIs to buy on Indian markets. The Indian saver’s interest in markets improved after the global financial crisis. Now, the Indian saver is enjoying the benefits of investing through mutual fund platforms, cash equities, derivatives markets, insurance funds, global private equity in India, and platforms like AIFs.
To create sustained growth in India, several key areas need attention. Post-Covid, investors have joined, but the Nikkei Index remains below its 1989 peak. Policy, regulation, education, and quality paper supply are needed to prevent bubbles. Companies should raise equity at lower capital costs, and tax arbitrage in debt is necessary. The banking sector faces challenges in deposits and funds costs, and the large corporate sector must move to capital markets. Balancing developmental and regulatory roles is crucial.
