India’s economic strength, capital pools and digital infrastructure are strengthening its geo-economic influence: V Vaidyanathan

India’s rising geo-economic clout rests firmly on its growing economic strength, deep sources of domestic capital and rapidly expanding physical and digital infrastructure, said V Vaidyanathan, Managing Director & CEO of IDFC First Bank, speaking at the Times Network India Economic Conclave 2025.Vaidyanathan said geoeconomics ultimately comes down to economic power. “Trade negotiations, tariffs and supply chains are all determined by the underlying strength of an economy — what a country produces, what others need and how competitive it is,” he said, citing China’s manufacturing scale and America’s $30 trillion consumer-driven economy as examples.

India, he said, is now asserting its own strength. “From a $1.5 trillion economy a few years ago, India is now worth almost $4 trillion. That growth story is strongly reflected,” he noted.

Infrastructure reduces costs and increases competitiveness

Vaidyanathan highlighted India’s massive infrastructure investments over the past decade, including the construction of nearly 50,000 km of national highways, which have structurally reduced logistics costs. “When goods are stuck for hours, productivity is lost and fuel is wasted. Investments in infrastructure have permanently driven down the cost of goods,” he said, adding that such results could not have been achieved through short-term budgets.

In addition to the physical infrastructure, India’s ‘digital backbone – cloud, data, 5G and real-time systems’ is emerging as a powerful growth engine. “The combination of physical and digital infrastructure creates real magic, which is why India continues to be the fastest growing major economy in the world,” he said.

The financial system is becoming stronger, capital pools are increasing

From a financial sector perspective, Vaidyanathan says India is at a rare and opportune moment. The banking system’s net assets have risen to ₹29-30 lakh crore, while system-wide lending has expanded to around ₹180 lakh crore, almost 2.8 times growth in a decade, despite disruptions due to GST, demonetisation and the pandemic.

Deposits now stand at around ₹240 lakh crore and are growing at around 10% annually, while mutual fund assets under management have risen from ₹11 lakh crore to ₹66 lakh crore over the past decade. Alternative investment funds (AIFs) and PMS assets have grown tenfold to ₹23 lakh crore. “These capital pools finance infrastructure, startups and economic expansion. This capital formation is a composite story, driven by nominal GDP growth and systemic liquidity,” he said.

Macro stability makes capital raising possible

Vaidyanathan highlighted that India is witnessing a rare combination of low inflation and high growth, creating an ideal environment for capital formation. Recalling past challenges, he said it was difficult to raise even ₹800 crore of capital during 2010-2013 due to negative sentiment.

“In the last five to six years, IDFC First Bank has raised ₹21,000 crore in equity capital. That reflects confidence in India’s growth, digitalisation, rule of law and business prospects,” he said.

Market and digital ecosystems deepen inclusion

He also underlined the importance of India’s market infrastructure – from faster settlement cycles at NSE and BSE to improved clearing systems, credit bureaus and rating mechanisms. “These institutional capabilities are critical for sustainable growth and global investor confidence,” he said.Equally transformative is India’s digital financial ecosystem, which includes digital identity, fraud monitoring, cash flow analytics, e-mandates and e-agreements. “This is not academic. Our bank now provides over a million loans per month, powered by algorithm-driven credit evaluation,” said Vaidyanathan.

He noted that this ecosystem is accelerating financial inclusion in small business lending, skills financing, rural credit and sanitation financing, areas once considered difficult to serve safely.

Economic strength underlies geoeconomics

In summary, Vaidyanathan said India’s macro stability, capital depth, infrastructure and digital systems have fundamentally changed India’s growth trajectory. “Only a growing economy gives a country the strength to meaningfully engage in geoeconomics and geopolitics. From a practical perspective, India is in a much stronger position today than ever before,” he said.