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No people whose word for ‘yesterday’ is the same as their word for ‘tomorrow’ can be said to have a firm grip on time,” the novelist Salman Rushdie once quipped, referring to his Indian heritage.
The maxim is particularly apt when it comes to the slow pace of financial reform: since the early 1990s, the Indian elite has deferred efforts to liberate the banking sector from the vice-like grip of state control and attacked crony capitalists that lay siege to public-sector banks.
In fact, India’s relative resilience to the 2008 global banking crisis gave the New Delhi establishment and bankers in Mumbai a false sense of control over the levers of the economy while, once again, postponing badly needed reforms to the financial industry.
Fast-forward to 2014 and the price of hubris has been exposed: Indian public-sector banks face a capital crunch without urgent redress; corporate leverage is at an all-time high, and a slew of reforms is needed to jump-start the next credit cycle as the battered economy stages an uptick.
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• Waiting game continues for foreign investment banks • Unchain Indian finance |
Mumbai bankers are now hoping for audacity as a political earthquake has transformed the banking and capital-market outlook, bloodied for the past 18 months, with the spectacular victory of the reform-minded Bharatiya Janata Party, led by Narendra Modi, who assumed office at the end of May.