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UPSC Online Editorial Analysis

Editorial – 1

Title of the editorial: The case for Indian lending

Written by: Manish Sabharwal – The writer is with Teamlease Services

Topic in syllabus: Indian Economy and issues relating to planning, mobilization, of resources, growth,
development and employment. (GS-3)

Analysis about: This editorial talks about how Chinese government is against the free and open market by giving the example of Ant IPO case, and it also talks about what India must do to grab global investors.


What is Ant IPO case?

  • The Ant group is a Fintech company, controlled by China’s richest man Jack Ma of the Alibaba fame.
  • He wanted to take the Ant group public, and raise up to 37 billion dollars in the process. This would have been the largest IPO, or initial public offering in the world.
  • The Chinese government has suspended the public listing of this company, marking a big blow for Jack Ma – China’s most celebrated entrepreneur.
  • According to multiple claims, this was done because Ma was becoming bigger than the Chinese state itself.
  • Reportedly, the orders came straight from the top, which could potentially even mean President Xi Jinping himself. China said it wants to maintain the stability of the capital markets.


  • Chinese stock markets had been closed for 41 years after the communist revolution in 1949. Yet, the largest IPO in history happened outside New York and London — the $3-trillion worth of applications for the Ant IPO equal India’s GDP.
  • But regulators cancelling the $35-billion IPO 48 hours before stock trading, captures the challenges of reconciling communist rule with free markets, entrepreneurship, and status quo challengers.
  • It is the case that the global economic gravity shift to Asia combines with China’s contradictions to create a unique opportunity for more financial institutions with an Indian “centre of gravity”.

Which company can we call an Indian?

  • Writer gives some example to show how it is not easy to categorise Indian and foreign.
    • Is Tata Nexon an Indian car despite imported components?
    • Is HDFC an Indian bank despite being majority-owned by foreigners?
    • Does Suzuki making more than half its cars in India make it an Indian company?
    • Does Lupin with 30 per cent of its revenues from India still make it an Indian company?
    • Does Satya Nadella as CEO make Microsoft an Indian company?
    • Does IBM having more employees in India than in the US make it an Indian company?
    • Does Hindustan Unilever’s gigantic stock market value make Unilever plc an Indian company?
  • It’s no longer simple, useful or insightful to classify company nationality by profits, revenues, management, shareholding, supply chains, or headcount.
  • But it’s clear that Tatas, HDFC and Lupin have their centre of gravity — or what Sanskrit delicately calls sthanabalam — in India.

India, financial institutions & bank credit issue:

  • The case for more financial institutions is simple. India has labour (100 million workers should evacuate farms) and land (giving every household half an acre would fit into Rajasthan and half of Maharashtra) but not enough capital.
  • The case for foreign financial institutions is also simple — their technology, processes, and experience raise everybody’s game.
  • India is open — foreigners own 25 per cent of public equity, 90 per cent of private equity, and Google and Walmart are UPI’s biggest volume contributors.
  • India’s challenge over the last 10 years has been bank credit. Credit-to-GDP ratio is stuck at 50 per cent.
  • The case for “Indian” lending financial institutions is strategic. Foreign institutions are unlikely to lend when needed most and lend to small enterprise borrowers.
  • The 2007-8 global financial crisis suggested that banks are global in life but local in death; regulators prioritise domestic stakeholders. The home bias for global bank lending is accelerating.

What is current position of China in global finance?

  • Chinese soft power is surely enhanced by five of the world’s 10 largest banks being Chinese.
  • 19 of the top 100 banks being Chinese.
  • 40 per cent of external sovereign debt of the 50 most indebted countries owed to Chinese institutions.

What we should do for more “Indian” lending financial institutions?

  • Creating a nationalised bank holding company that replaces the Finance Ministry’s Department of Financial Services, has no access to government finances, and is governed by an independent board.
  • Empower the RBI to deal with bank challenges earlier, faster, and invasively, by reimagining post-mortems, granting listed bank capital induction flexibility and making regulation ownership agnostic.
  • Explore new eyes for banking supervision that include differential deposit insurance pricing.
  • Financial stability and innovation are not contradictory; let’s blunt regulatory barriers between banks, non-banks, and fintech.

The way forward:

  • Indian entrepreneurs don’t need protection. They need freedom.
  • The best case for combining openness with an Indian centre of gravity comes from Gandhiji: “I don’t want my house to be walled in on all sides and my windows to be stuffed. I want the cultures of all lands to be blown about my house as freely as possible. But I refuse to be blown off my feet.”
  • The post-Mao Chinese communist party strategy of “fill their stomachs but empty their minds” has delivered incredible prosperity but has irreconcilable disagreements with the individuality or ekla cholo re of entrepreneurship.
  • The opportunities for India arising from the coming Asian century, China’s contradictions and China’s new inward focus strategy come not once in a decade but once in a generation. Let’s empower our financial services entrepreneurs to exploit this opportunity.

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