CEA Anantha Nageswaran envisions Account Aggregator to play a transformative role in the emergence of innovations in the financial sector - SamvAAd 2023
- India is poised for her Amrit Kaal, despite several macroeconomic events that interrupted her growth momentum over the last three decades.
- Longer financial cycle and sustained growth of ~6% over a decade are needed for India to fully reach its economic growth potential
- Account Aggregator framework is simple yet transformative, both for financial access and financial returns
- Financial service providers must ensure sufficient guardrails and self-policing are in place for AA ecosystem to sustain growth for both providers and its customers
Honorable Chief Economic Advisor (CEA) of India Dr. V. Anantha Nageswaran graced the occasion of first edition of SamvAAd, the industry event for the Account Aggregator Ecosystem hosted by Sahamati at Mumbai. He Opened the day-long dialogue, SamvAAd, with his Keynote Address focused on “My Data, Our Growth: The Importance of AA for India’s Amrit Kaal”.
The Ebbs and Flows of India’s Economic Growth in the millennium
India experienced a decade of high growth in the new millennium, with expectations of surpassing China and becoming a dominant force in Asia, around the time when BRICS acronym gained prominence. However, various crises hindered this anticipated shift, resulting in unsustained economic growth. While the first decade saw huge economic growth (even the bank credit to GDP ratio doubled), the second decade was a period of correction, with banks cleaning up their books, and corporates de-leveraging. The global crises post 2008, and sustained low-interest rates in our export markets thereafter, hampered India’s economic growth, as export was a significant driver of GDP.
Account Aggregator (AA) paving way for Financial Access
Account Aggregator (AA) is set to play a transformative role in improving financial access for the vast majority (80%) of the population lacking it. By facilitating data sharing for financial products, AA will not only enhance credit access but also improve access to other financial services. The abundance of granular and varied financial information provided by AA will improve the quality of loan underwriting. With this wealth of information, it is expected that financial cycles will improve at least double or triple times its previous one.
Ensuring India’s Sustainable Financial Growth
To achieve sustained GDP growth, India needs financial cycles that do not end within half a decade, as has been the historical pattern. The Digital Infrastructure along with AA, is expected to elongate financial cycles and upswings. For real transformation at the bottom of the pyramid, India requires at least a decade of consistent GDP growth above 6% (similar to 9% sustained growth witnessed by China between 1979-2008). Innovation, facilitated by AA, will be instrumental in fulfilling India’s long-awaited economic growth promise.
Self Policing is the Best Policing
While celebrating the positive impact of AA and financial access, it is crucial to consider the safeguards and guardrails needed to prevent data misuse, mis-selling, and predatory practices. Regulators can only do so much, and self-policing within the financial sector is necessary. With millions and billions of individuals entering the financial world, through AA, it is essential to ensure sustainable practices that benefit both providers and customers, while guarding against exploitative behaviors.
Striving for Meaningful Change
Amid uncertain economic growth, it is important to reflect on the progress made after the financial cycle contraction of the past decade. As India waits for the next financial cycle, the aim is to avoid a premature and rapid end, ensuring longer and stronger growth. The responsibility lies with all the stakeholders to achieve the desired GDP numbers and make a meaningful difference in the lives of individuals who lack financial access. (Sahamati’s) hard work behind the launch of AA in 2021, and all the good work by the participants of the ecosystem, will paved the way for further innovations that will positively impact the common people of India.
Watch CEA Dr. V. Anantha Nageswaran’s Key Note Address at SamvAAd 2023
You can also click here to watch it on Youtube.
In conclusion, while financial growth and innovation are crucial for India’s future, guardrails and best practices are essential for sustained prosperity cycles that can run for as long as possible.
We would like to thank Kshitij Shah for helping us cover the key-note address from SamvAAd 2023.