The Indian mutual fund industry is currently mobilising close to 8 per cent of the financial savings annually amounting to Rs 14,500 crore. This is well below the mutual fund mobilisation of over 35 per cent in the US.

Ficci has assumed for the study that GDP will grow at a constant rate of 6 per cent per annum for the next five years, with total domestic savings rate remaining static at 22.3 per cent in the next five years and mutual fund share in financial savings will move from 8 per cent in 1999-2000 to 30 per cent in 2004-05, with successive increase in each year by 4.4 per cent.

The study says that looking at the vast potential that lies in this industry, it is clear that this industry would have to gear itself up in terms of ability and expertise to handle such volumes. It is to be always remembered that growth of capital markets has more or less a positive relationship with the mutual fund industry in form of investments and returns. A detailed analysis of the existing price-earning ratio in the emerging market clearly implies that there lies enough space for the Indian capital market to enhance further, says the study. India has tremendous potentiality in this financial zone which is to be encouraged properly.

The Ficci study points out that the required investment should be at least 30 per cent with present level of incremental capital output ratio (ICOR) of 4 per cent to achieve growth rate of 7-8 per cent. Current savings rate of 22.3 per cent is not enough to meet the investment requirements.

To meet the shortfall, measures are being taken to step up the foreign direct investment. But this will not be enough to meet the shortfall. It is therefore necessary to step up the overall savings rate. The Ficci projection is optimistic of the role that private sector is going to play in the mutual fund industry in the years to come.