Case Study

Legatum has made a significant commitment to India, with over USD 1 billion invested to support the development of the country's financial services sector. Financial institutions are like an irrigation system in an economy carrying precious liquidity to the areas that really need it through insurance, savings products and general banking services that ultimately create higher standards of living. Wise capital allocation and commerce are the best means of accelerating prosperity. They have the power to dramatically change the lives of the 44% of Indians living on less than USD 1.00 per day.

A Growth Phenomenon

Present day India is one of the fastest-growing economies in the world. On a purchasing power parity basis, it is already the world's fourth largest economy - trailing only the United States, China and Japan. Whilst in 1991 the country was in the throes of a foreign exchange crisis and forced to turn 'cap in hand' to the IMF for assistance, by 2006 it had in excess of USD 145 billion in foreign exchange reserves - 25% of that accounted for by the booming IT sector. This is a staggering pace of change.

Significant Challenges To Be Met

There are, of course, a number of challenges still looming on India's horizon. Much of India's infrastructure is antiquated, and cannot support the expanding population. Education is highly uneven - with a few excellent universities offset by a much larger system of schools that are not serving local populations. Regulations and trade unions still hamper business, and with India importing 60% of its oil needs and an increasing amount of natural gas, it is vulnerable to global energy prices.

The global economic impact of India's emergence will be profound - India is estimated to grow to 17% of world GDP in 2050 from a mere 2% in 2004. Financial services have a key role to play in ensuring that India not only fulfils this potential, but in transforming the country's growth into prosperity for all.