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Financial architecture as the underpinning for BIMSTEC policy
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SME Times News Bureau | 20 Jul, 2019
Indias push towards further strengthening the Bay of Bengal Initiative
for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) fits
well with the objective of Indian economic growth. Growth of the
economic region surrounding India, with India taking the lead is
critical. The "Economic Cooperation" aspect of BIMSTEC is one in which
India can contribute significantly by helping to create the financial
architecture that will lay the foundation of an economically viable
framework for BIMSTEC nations to all benefit from.
India's
objectives of boosting inter-regional trade and of increasing its
exports would imply that India needs to move ahead with its plan to
establish itself as a South-Asian financial hub that can cater to
facilitating both trade and financing for the region. The financial
sector must be viewed as both a growth area and an area that will
promote the growth of other industries that currently need funds. While
the countries in the BIMSTEC region vary in terms of GDPs and economic
growth levels, they are combined by the fact that with growth and rising
incomes a region with a population higher than 1.5 billion people and a
combined nominal GDP of $3 trillion has potential for further growth,
especially as access to financial services improves.
As incomes
rise, access to financial services will be required further in the
BIMSTEC region. Households will need access to instruments that allow
them to save, invest, plan for retirement and insure against exigencies.
In common parlance, access to financial products will be required. This
financialisation of the economy implies access to financial products,
insurance, pension funds etc. The need for greater access to financial
products is why India needs to step in and utilise upcoming financial
infrastructure assets such as the International Financial Services
Centre and other similar assets to facilitate the financial sector in
these countries.
Essentially, as the mutual funds, insurance and
pension industries grow in the BIMSTEC region, India must create
financial hubs that can facilitate these industries in the BIMSTEC
countries. Going a step further to cement its position as a South-Asian
financial hub even more, India needs to help provide liquidity by
potentially allowing for companies in the BIMSTEC region to list on
special bourses in India. The aim is the agglomeration of financial
services to help boost regional economic ties.
India, like other
nations, has faced recent challenges around financing exports and
infrastructure. While short-term export financing, which can be broadly
termed as trade finance and long-term infrastructure financing are
primarily viewed as two ends of a spectrum, they feed the demand for
each other. Having a robust market for one type of funding without the
other is difficult, if not impossible. Many infrastructure assets such
as ports, roads and railways are dependent on trade, which in turn is
highly dependent on trade financing. Demand for infrastructure assets
that makes such assets attractive to investors is highly reliant on a
vibrant trade finance market.
Therefore, it is not surprising to
see countries such as Singapore with top-notch trade finance markets
having world-class infrastructure as well. The foregoing discussion on
the linkage between trade finance and infrastructure financing is
another vital factor as to why India must look to position itself as a
South-Asian finance hub. Allowing both domestic and foreign capital,
to finance export growth within the BIMSTEC region while utilising the
Indian financial centres will be vital to ensure that the flow of
capital remains intact.
The most critical element for boosting
economic growth in both India and its trade partners in BIMSTEC is to
view the financial inter-linkages in exports, infrastructure and capital
markets as one chain of economic phenomena with various parts that all
equally important, and not as silos that can be grown individually. An
economic and investment hub in India for the BIMSTEC region that will
allow financing of economic growth, exports and assets will drive real
economic growth across the spectrum.
The economic success of
BIMSTEC will be mostly dependent on the ability to create common
financing linkages that allow trade, finance, infrastructure and, most
importantly, economic growth to flourish in the region. India's role
must be to lead the pack towards creating the financial architecture
that can serve as the underpinning of BIMSTEC.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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