India ranks 31st in WEF's financial development index

India has been ranked at the 31st position in the World Economic Forum’s (WEF’s) first Financial Development Index, topped by the US and the UK, on the back of robust performance of its financial markets and non-banking institutions.

“While India delivered solid results in terms of its financial markets particularly foreign exchange and derivatives, its banks appear hamstrung by lack of size, low efficiency and poor information disclosure,” the financial development report said, adding despite the lacunae the banking system is stable due to sizable capital buffers.

India came in at 31st in terms of its overall ranking, while China is at the 24th position. The other BRIC peers Brazil and Russia are at the 40th and 36th position, respectively.

 

“Emerging markets such as China and India that have been primary drivers of global economic growth in the new millennium have yet to see the extent to which ‘decoupling’ truly exists and if their economic expansion can continue independent of the financial trauma plaguing the US and other developed countries,” the report added.

Pointing out that the business environment of India shows significant room for development, the report said, “India receives low marks related to the liberalisation of its domestic financial sector and capital account..”

The US has surpassed the UK to take the top position in the Financial Development Index. The US and the UK have close rankings, outstripping the remaining countries in the top 10 — Germany, Japan, Canada, France, Switzerland, Hong Kong SAR, Netherlands and Singapore.

The US and UK’s collective strength of financial intermediaries and markets in these countries, spanning banks, investment banks, insurance companies, equity markets, and bond markets is unparalleled.

“Besides issues of financial stability that are common to both countries, regulatory issues and judicial reform remain lingering areas for improvement in the US, while the cost of doing business in the UK is an area of concern,” the report added.

Meanwhile, China is ranked 24th of the 52 countries in the index. Large inflows of capital driven by rapid export-driven economic growth have promoted the size and depth of its financial markets.

Interestingly, India’s neighbouring country Pakistan comes in a few notches below India at the 34th position, but demonstrates similar strength in its financial markets.

Pakistan’s banking system is also strong, bolstered by very high levels of efficiency. However, Pakistan’s institutional and business environments earn very low marks in most areas such as domestic financial sector liberalisation and infrastructure.

The Financial Development Index provides comprehensive analysis of financial systems and capital markets in 52 countries.

The rankings are based on over 120 variables spanning institutional and business environments, financial stability, and size and depth of capital markets, among other factors, in assessing the complex financial systems of the 52 countries studied.