The Hindu Business Line : India may become third largest banking market by 2040: Survey

Chennai, June 29India is likely to emerge as the third largest domestic banking market in the world by 2040 and could grow faster than China in the long run, according to a report by PricewaterhouseCoopers called ‘Banking in 2050: How big will the emerging markets get?’

The report projects that the banking sector will grow significantly faster than GDP in the emerging economies of China, India, Brazil, Russia, Indonesia, Mexico and Turkey.

Total profits from domestic banking in these countries could be around half of those in the G7 nations (US, Japan, Germany, UK, France, Italy and Canada) by 2025 and larger before 2050.

The study examines the possible changes in the scale of the banking sector between now and 2050 and highlights the pace of change, while providing some measure of the size of the opportunity and challenge for banks.

Tendency analysis

The projections are based on an analysis of developments in banking markets since the 50s, which highlights the tendency of the banking sector to grow faster than GDP as economies develop. Mr Jairaj Purandare, Executive Director, PricewaterhouseCoopers India, said: “The analysis suggests that India is likely to be the fastest growing of the emerging economies in the long run.” He added: “The model also suggests that China will continue to grow somewhat faster than India over the next 5-10 years but after that, Chinese growth will be held back by its rapidly ageing population and diminishing returns. In contrast, India and other emerging economies have much younger populations with faster-growing labour forces.” In a previous report called ‘The World in 2050,’ published in March 2006, PricewaterhouseCoopers economists predicted that by the year 2050, the emerging economies will have outstripped the G7 nations by around 25 per cent when comparing GDP using market exchange rates, and around 75 per cent when using purchasing power parity exchange rates.

The strategic implications of the rise of the banking markets in the emerging economies include strong growth in M&A activity both within and across borders. Restructuring of the economies should also create major opportunities for private equity firms, the report said.