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Conference Reports |
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Sanjeev Sanyal
Sanjeev Sanyal addressed the question of Investment Financing in India and China. He attributed the investment boom witnessed in China to an increase in savings rate and a significant bulge in the percentage of working population in the 1980s. China's inefficient banking system caused the funds to be randomly allocated to projects and this caused the failure rate of these investments to be considerably high. However, irrespective of the success rate, he noted that countries like China and Korea demonstrate that the general populace is better off having randomly invested than not having invested at all.
With reference to India, Sanjeev mentioned that the demographic structure of India is changing favourably with an increase in the proportion of working age population in 2005. Consequently, the savings rates are expected to increase from the current levels of 22% to about 33% within the next 10 years. He noted that the governments have induced transparency in the banking industry but his concern was the inadequate laws to empower creditors. This imbalance curbed the banks power to allocate funds efficiently, especially to entrepreneurs. Without adequate investment avenues available to banks, Sanjeev was concerned that the impending investment boom might just be a wasted opportunity. He advocated developing a strong judicial system to enforce the laws regarding bankruptcies and foreclosure in order to give the creditors a legal right to liquidate. He feared that if things are not changed and soon enough, we might face a monetary management crisis.
Sanjeev noted that we can avoid repeating the random investing that the Chinese made, however we need to empower our banks to actually do banking and not just bond portfolio management.
Sanjeev Sanyal is Director - Global Economic Research, Deutsche Bank
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