The opportunity of India’s accelerating development

His first visit in nine years again underlined the importance of the emerging relationship between the two countries and their shared purpose in areas such as trade, defence, education and migration.

"With a country developing and changing so quickly, each visit is an eye opener and you learn that your preconceptions of India are quickly out of date.”

The closeness of the bilateral ties was reinforced when Prime Minister Anthony Albanese led a business delegation to India in March. I was part of that delegation and it underlined again how important the Indian market will be – not only for Australia but for ANZ’s international business.

Our Indian business – which services global multinationals operating in India and Indian multinationals operating globally, including Indian banks, is going from strength to strength. It’s growing more than 20 per cent a year and already delivering returns to shareholders well above our cost of capital – and the size of the opportunity is not lost on us.

India is on track to soon become the world’s most populous country and the world’s third largest economy within the decade. The value of bilateral trade with Australia alone could hit $US52 billion by 2030, according to ANZ Research. Of course, with ANZ’s global network, our opportunity is far more than just intermediating trade between our two nations and that’s why we are excited to already have a strong, growing foundation in India.

Just a couple of months after my last visit, members of our Group Board, New Zealand Board and I were again in India last week to meet with customers, staff, local officials and cultural leaders. We went to learn - and we learned a lot. With a country developing and changing so quickly, each visit is an eye opener and you learn your preconceptions of India are quickly out of date.

Indian stack

The transformation of the Indian economy is only at the beginning and the benefits of long term coherent and substantive reform is evident, particularly when referencing what is locally known as the “Indian Stack”.

The “stack” has three main legs working seamlessly together to unlock productivity and creativity – a biometric national ID for every Indian; low-cost ubiquitous access to smart phone technology; and a free real time payment network, UPI. While we can read about these innovations, there is no substitute for experiencing it and that was the core purpose of our visit.

It’s clear sustained reform can unlock value and the impact is improving the lives of all Indians, most importantly for the most vulnerable. It’s an honour and great opportunity for ANZ to be a small part in this given our purpose and capabilities.

Those capabilities are rooted in our original association with India which began in 1986 with the acquisition of Grindlays Bank. We operated as ANZ Grindlays, India’s premier retail and business bank.

While we sold Grindlays earlier this century, we refocussed our business and in 2011 received a license to operate our first branch in Mumbai. Our brand is incredibly strong. Barely a meeting is started before our hosts mention their strong family relationship with ANZ Grindlays.

Our operations now spread across three Indian cities, Mumbai, Gurugram and Bengaluru, with over 200 Institutional clients, including many multi-national corporations.

Our India operation sits within our Institutional division which has been reshaped in recent years into a slimmed down, less risky, more profitable unit. That’s not to say we have curtailed our ambitions in growth markets like India. Quite the opposite – we are seeking to allocate more of our capital to the Institutional business given the relative higher returns.

Institutional posted a record result at our half-year earnings last month, producing strong returns in each region and robust revenue growth across all products. The international business contributed to more than 60 per cent of that revenue growth.

The international business is becoming increasingly important and we have maintained and expanded our presence in some key Asian markets to help deliver a key plank of our strategy – which is to help companies move goods and services around the region.

Multinational opportunity

We’re committed to growing our India business by focusing on a several customer segments – large local corporates, global multinationals operating in India and other financial institutions based in or operating within India. During our visit this week we met with companies including Tata, Kotak Bank, State Bank of India, Reliance, Mahindra and Mahindra, Birla and HDFC Life.

We offer full banking services to our clients in India and across the region, including markets, transaction banking and corporate finance products.

By servicing both large local corporations requiring banking services and large multinational companies seeking to boost their operations in India, ANZ is well placed to capitalise on the forecast economic boom. It also allows us to connect our customers to the vast opportunities in the country and around the region.

It is the world’s fifth largest economy and its share of global gross domestic product has more than tripled since 1992. Foreign direct investment is booming and our transaction banking and hedging solutions to financial sponsors and investment funds will help capitalise on the rapidly growing inbound capital flows.

Other trends that will broaden the business opportunity in India include its embrace of the energy transition and its rapid push towards digitization of its economy.

India announced its 2070 net zero target at the United Nations Climate Change Conference (COP26) in Glasgow in 2021. And recently it updated its Nationally Determined Contribution (NDC) under the Paris Agreement to reduce emissions intensity by 45 per cent below 2005 levels by 2030 and increase share of non-fossil power capacity to 50 per cent by 2030.

And like Australia, India hopes to tap the green hydrogen opportunity. The country’s Green Hydrogen Policy (announced in February 2022) targets the production of 5 million tonnes of green hydrogen by 2030 as India strives to be an export hub for renewable energy fuel.

To help play our part in the energy transition, ANZ has set itself a new $100 billion by 2030 social and environmental sustainability target, given we were on track to exceed its previous $50 billion target. The bank also participated in 56 sustainable finance deals worth $75 billion in the six months to September 30.

Talent pool

And on top of all that, one of the most exciting things about India is the incredible opportunity we have for skills transfer and to tap into the inimitable pool of technology talent on offer.

India also became the favoured destination for international companies setting up global capability centres and back offices, a market expected to touch $US85 billion by 2026. India now supports nearly 43 per cent of the world’s financial service industry in areas like operations and research.

ANZ was early to this trend and the 8000 staff in our Global Service Centre in Bengaluru represent about 20 per cent of our global workforce. These people are a great addition to our team and work seamlessly with our Australia, New Zealand and global teams to provide leading edge services to our customers.

But the technology expertise spreads wider across our organisation than just service centres. The talent being fostered and developed in India is helping us improve customer experience right across the bank – as well as developing efficiencies in areas like automation, artificial intelligence and machine learning. These developments will support our people to focus on the work that is of more value to our customers.

The result of these factors for our Institutional business – including our position in growth markets like India – is that, as the most diversified and internationally focused of the Australian banks, we are uniquely placed to capture the opportunity India’s ongoing emergence will present.

Shayne Elliott is CEO of ANZ.