FEATURE
INCLUSIVE GROWTH IN INDIA:
WHY STILL A MIRAGE?
- Dr. K. Shanker Shetty
Cont. from last month
WHAT AILS INCLUSIVE PROCESS?
It must be made abundantly clear that on the gigantic task of building our nation inclusion of the poor and the neglected in the economic growth process is important, because unless we include and improve their lot through inclusion, their children may grow as dangerous segment of india’s population easily lured towards extremism as religious fanatism.
However, the focus must be to develop a cost effective method through which effective payments and providing loans to the needy in real terms is assured. They must also be provided with an integrated service that ought to be deviced to meet their personalized needs. This obviously warrants an exclusive business model targeted toward the poor and low – income groups. It must, however, be preceded by focusing on spreading financial literacy and awareness about multifarious financial products like insurance and pension; banking scheme specially divised for them etc,. In this task technology can play an effective role i.e. telecom companies, in co – ordination with banks and other service providers can make financial inclusion through improved communication network i.e. there must have an increased status of ‘technology delivered inclusion’. The challenge in this gigantic task is as to how to augment the earnings of the people in the lowest strata of socio-economic society. Yet, Rural poor can be made self – reliant through tailor made insurance and pension availability to a wider spectrum.
Whereas the issue of poverty concerns all sections, our traditional political ideology kept the corporate sector and voluntary agencies away from the main productive activities resulting in low growth and increased hungry mouths. Even after 1991 reforms, middle class rose to 450m leaving the rest in lurch craving for minimum level of employment opportunities, schools and health care schemes and projects which were part of planning process since 1950 to uplift the poor but simply failed to deliver due to apathy and corruption at all levels of government machinery coupled with beauracratic indifferences, unaccountability and colossal neglect.
In the circumstances, Indian poor still suffer from abject poverty facing lack of housing facilities, clothing, education, healthcare, employment etc. and their inclusion in the process of development is a must.
It was nobel laureate Amartya Sen who wrote in his book ‘The idea of Justice” that ‘Niti’ relates to organizational propriety as well as behavioural correctness, whereas the ‘Nyaya’ is concerned with what emerges and how and in particular lives that people are actually able to lead. Regretfully, in India we have none with the exclusion of a major segments of its population.
Indian authorities though are eloquent when they refer to Indian secularism in unision specially in political context, conveniently forget that ethos of justice and equality forms an inseparable part of inclusive growth process as under lying justice and also as the guiding tenet of Indian secularism too.
China’s success in poverty reduction during its early part of reform process between 1979 – 1995 resulted in bringing down the rate from 32 percent of rural population to only 8 percent, because, during this period, unlike in India, they aimed through an inclusive growth policies at increasing remuneration to farmers, operated substantially to reduce rural poverty through improved infrastructure combined with controlled trade and investment liberalization, generated more employment opportunities by encouraging small export – oriented manufacturing units in rural areas. India, however, concentrated in urban areas and consequently neglected inclusive growth of rural areas. In implementing social security measures Indian government neglected ‘realism’ and compromised its own ideals.
Resultantly, poverty continued to persist and has transformed into a major challenge because India’s poor are still too poor and their standard of living refuses to improve. Hence, there is an urgent need for the social forces who can help to change the rural life through inclusive magic wand. UNESCO report on education in January 2010 stated that India still has the largest number of illiterate adults in the world. Therefore, India must adopt an inclusive growth policy, looking inward in cleaning its government, so as to uplift its poor by including and involving them in the national activities. There must also be inventiveness to serve cause of poor with justice and equality.
Policy of populism through various welfare schemes has failed to improve inclusive growth, which also affected the future growth of the nation. Such schemes virtually became a holy milch cows feeding the vote bank politics and at the cost of inclusive principles. India which stagnated at 1.5 to 3.5 percent GDP growth for four decades increased it to 8 percent; but the lives of a major segment of the population left untouched.
The only magic wand that India can wave to have a serious inclusive process of poor at present is by waging a war on corruption at the top echelons of government machineries at all levels. But the question is who will bell the cat?
Financial inclusion process which should have been a channel for comprehensive inclusive growth process in Indian context provides a picture of dismal failure of concerned authorities. The avowed objective of government banks and SHGs in India to reach every Indian have to candidly admit that for long financial sector has ignored the needs of the poor. Resultantly, financial inclusion remained only on paper since even in 2009, only 8 percent of the population has access to institutional finance in India. Dr. K. C. Chakraborty, Dy. Governor, RBI, a staunch champion of inclusive financing by banking sector in India says “The whole world is looking at India to show the way in the area of financial inclusion”. Yet, 45.9m or 54.4 percent of agricultural households in India still lack any kind of credit; 204 of 431 districts targeted only have reached satisfactory level of financial inclusion. Though 69 percent of 75000 cr. under MGNREGA was granted, through banks, tangible results are yet unknown. It is to be noted that even in 2010 only 54 percent adults have a bank account and less than 10 percent of villages benefit from a bank branch and that is after 40 years of public ownership of banks in India. Therefore, what is needed is to understand the integration of needs of the poorest in the market segment and provide them with backward and forward support to bring those hitherto financially excluded into banking fold. This could be achieved by the banking process provided, they extend technology oriented basic telephone lines; encourage SMS banking; providing internet access and motivating more rural people to opt for mobile banking; extending, rural employment guarantee schemes, Bharat Nirman and Golden quadrilateral highway pass through rural centres; encouraging more poor to enter the mainstream banking etc.
Accumulated exclusion matrix in this regard comprise of unbanked population of 400 million with hardly 45 percent of population have access to financial services. In this regard though government has stipulated that banks must provide banking services in every village having population above 2000 by Mar 2011 is likely prove to be an utopian target. Inspite of KYC, farm credit cards, no – frills account opening facilities provided, ‘exclusion’ reign large in the country. The poverty amelioration targeted schemes by government, lacked purpose and logical implementation due to apathy of the government officials and reservations by banks. Micro – financing ventures by banks, though succeeded in some respects failed to achieve on universal basis, due to their failure to innovate and expand. Role of technology in financial inclusion process is yet to take off specially in non urban – areas. This is inspite of the fact that 40 percent i.e. 32,000 of total branches are in rural areas; 45000 ATMS, 4,70,000 POS, nearby credit cards at 168 million and Kisan Credit Cards 76m in use.
Out of 403 million mobile holder of which 46 percent did not have bank accounts as at June 2009. Everyone has a passion (or is it fashion) in recent years that rural and inclusive growth agenda must continue inspite of financial crisis or global situation becoming hostile. If India has to pursue a vibrant economy, inclusive growth is vital and singularly decisive. This warrants providing affordable clean drinking water, which shall improve the health of an important segment of community and wholesome package of security measures.
Despite of hurdles, services in rural banking must be made available at a lesser cost and least cumbersome procedures. Term landing and other financial institutions must be pursuaded to extend cheaper funds for investment in infrastructure like roads, water supply, educational institutions etc in rural areas. RBI must utilize business correspondents, Local Area Banks, RRB to cover the remotest areas.
In nutshell, the objectives of the government, RBI, Banking and financial institutions ought to be to bring over 700 million rural Indians within the main frame of economic growth which must have a cascading positive impact on the lives of the poor to move out of poverty and improve their quality of life.
However, financial sector ensure to take care that they do not push the farmers into a debt trap, or charging higher rate of penal interest on delayed repayments arising out of circumstances which are beyond the comprehension of the small borrowers both in rural and urban areas; or not to indulge in depreciating the value of principal assets; and by simplifying the whole gamut of lending and repayment procedure.
Government must also ensure to create parallel institutions “of the, by the and for the” poor so as to channel food and other BPL entitlements. This could be achieved through SHGs that are experienced in distributing PDS grains, BPL cards or NREGA cards which can if implemented properly, timely and adequately, be very effective in alliavating the poverty impact. Similarly food coupon system may be introduced as an universal programme throughout India which may facilitate to a great extent to remove some of the ills that plague India’s targeted PDS, by enabling the households directly securing the food in exchange for coupons thus avoiding corruption and middlemen menace which pervade the PDS at present. This may also help to minimize the exclusion errors of genuinely poor segment; reduce the number of ghost / absentee cards; avoid leakage at fair price shops; and finally ensure the quality of food distribution.
Studies made revealed that with regard to raising the quality of life of the poorest in India can be improved by adopting market based solution for inclusion of the targeted groups. In this direction, if efforts an made to engage the services of a wide spectrum of organizations, including NGOs and corporate sectors, it may serve as an innovative device for development of the poverty – stricken people into the future. However, such an effort may succeed if the government takes serious policy initiative towards financial inclusion, to secure inclusion, to secure a sustainable livelihood to the poorest coupled with sustainable growth and improved access to such people to enjoy the fruits of continued economic and social sector growth. They must have entry into the sphere of universal healthcare, education, food security, water and sanitation and renewable energy provisions. However, it can be achieved only when rural and urban poor have enhanced their buying power to meet their minimum aspirations through local solutions. Micro – financing with active participation of private sector can work wonders in this regard, provided such micro financing are not burdened with cap on lending rates which may scare away financing agencies. Cost benefit analysis must be the logic to derive at a reasonable pricing on these transactions.- Continued in next issue
THE REMEDIES - (read our Jan. issue)
Author is Former General Manager of Vijaya Bank
WHY STILL A MIRAGE?
- Dr. K. Shanker Shetty
Cont. from last month
WHAT AILS INCLUSIVE PROCESS?
It must be made abundantly clear that on the gigantic task of building our nation inclusion of the poor and the neglected in the economic growth process is important, because unless we include and improve their lot through inclusion, their children may grow as dangerous segment of india’s population easily lured towards extremism as religious fanatism.
However, the focus must be to develop a cost effective method through which effective payments and providing loans to the needy in real terms is assured. They must also be provided with an integrated service that ought to be deviced to meet their personalized needs. This obviously warrants an exclusive business model targeted toward the poor and low – income groups. It must, however, be preceded by focusing on spreading financial literacy and awareness about multifarious financial products like insurance and pension; banking scheme specially divised for them etc,. In this task technology can play an effective role i.e. telecom companies, in co – ordination with banks and other service providers can make financial inclusion through improved communication network i.e. there must have an increased status of ‘technology delivered inclusion’. The challenge in this gigantic task is as to how to augment the earnings of the people in the lowest strata of socio-economic society. Yet, Rural poor can be made self – reliant through tailor made insurance and pension availability to a wider spectrum.
Whereas the issue of poverty concerns all sections, our traditional political ideology kept the corporate sector and voluntary agencies away from the main productive activities resulting in low growth and increased hungry mouths. Even after 1991 reforms, middle class rose to 450m leaving the rest in lurch craving for minimum level of employment opportunities, schools and health care schemes and projects which were part of planning process since 1950 to uplift the poor but simply failed to deliver due to apathy and corruption at all levels of government machinery coupled with beauracratic indifferences, unaccountability and colossal neglect.
In the circumstances, Indian poor still suffer from abject poverty facing lack of housing facilities, clothing, education, healthcare, employment etc. and their inclusion in the process of development is a must.
It was nobel laureate Amartya Sen who wrote in his book ‘The idea of Justice” that ‘Niti’ relates to organizational propriety as well as behavioural correctness, whereas the ‘Nyaya’ is concerned with what emerges and how and in particular lives that people are actually able to lead. Regretfully, in India we have none with the exclusion of a major segments of its population.
Indian authorities though are eloquent when they refer to Indian secularism in unision specially in political context, conveniently forget that ethos of justice and equality forms an inseparable part of inclusive growth process as under lying justice and also as the guiding tenet of Indian secularism too.
China’s success in poverty reduction during its early part of reform process between 1979 – 1995 resulted in bringing down the rate from 32 percent of rural population to only 8 percent, because, during this period, unlike in India, they aimed through an inclusive growth policies at increasing remuneration to farmers, operated substantially to reduce rural poverty through improved infrastructure combined with controlled trade and investment liberalization, generated more employment opportunities by encouraging small export – oriented manufacturing units in rural areas. India, however, concentrated in urban areas and consequently neglected inclusive growth of rural areas. In implementing social security measures Indian government neglected ‘realism’ and compromised its own ideals.
Resultantly, poverty continued to persist and has transformed into a major challenge because India’s poor are still too poor and their standard of living refuses to improve. Hence, there is an urgent need for the social forces who can help to change the rural life through inclusive magic wand. UNESCO report on education in January 2010 stated that India still has the largest number of illiterate adults in the world. Therefore, India must adopt an inclusive growth policy, looking inward in cleaning its government, so as to uplift its poor by including and involving them in the national activities. There must also be inventiveness to serve cause of poor with justice and equality.
Policy of populism through various welfare schemes has failed to improve inclusive growth, which also affected the future growth of the nation. Such schemes virtually became a holy milch cows feeding the vote bank politics and at the cost of inclusive principles. India which stagnated at 1.5 to 3.5 percent GDP growth for four decades increased it to 8 percent; but the lives of a major segment of the population left untouched.
The only magic wand that India can wave to have a serious inclusive process of poor at present is by waging a war on corruption at the top echelons of government machineries at all levels. But the question is who will bell the cat?
Financial inclusion process which should have been a channel for comprehensive inclusive growth process in Indian context provides a picture of dismal failure of concerned authorities. The avowed objective of government banks and SHGs in India to reach every Indian have to candidly admit that for long financial sector has ignored the needs of the poor. Resultantly, financial inclusion remained only on paper since even in 2009, only 8 percent of the population has access to institutional finance in India. Dr. K. C. Chakraborty, Dy. Governor, RBI, a staunch champion of inclusive financing by banking sector in India says “The whole world is looking at India to show the way in the area of financial inclusion”. Yet, 45.9m or 54.4 percent of agricultural households in India still lack any kind of credit; 204 of 431 districts targeted only have reached satisfactory level of financial inclusion. Though 69 percent of 75000 cr. under MGNREGA was granted, through banks, tangible results are yet unknown. It is to be noted that even in 2010 only 54 percent adults have a bank account and less than 10 percent of villages benefit from a bank branch and that is after 40 years of public ownership of banks in India. Therefore, what is needed is to understand the integration of needs of the poorest in the market segment and provide them with backward and forward support to bring those hitherto financially excluded into banking fold. This could be achieved by the banking process provided, they extend technology oriented basic telephone lines; encourage SMS banking; providing internet access and motivating more rural people to opt for mobile banking; extending, rural employment guarantee schemes, Bharat Nirman and Golden quadrilateral highway pass through rural centres; encouraging more poor to enter the mainstream banking etc.
Accumulated exclusion matrix in this regard comprise of unbanked population of 400 million with hardly 45 percent of population have access to financial services. In this regard though government has stipulated that banks must provide banking services in every village having population above 2000 by Mar 2011 is likely prove to be an utopian target. Inspite of KYC, farm credit cards, no – frills account opening facilities provided, ‘exclusion’ reign large in the country. The poverty amelioration targeted schemes by government, lacked purpose and logical implementation due to apathy of the government officials and reservations by banks. Micro – financing ventures by banks, though succeeded in some respects failed to achieve on universal basis, due to their failure to innovate and expand. Role of technology in financial inclusion process is yet to take off specially in non urban – areas. This is inspite of the fact that 40 percent i.e. 32,000 of total branches are in rural areas; 45000 ATMS, 4,70,000 POS, nearby credit cards at 168 million and Kisan Credit Cards 76m in use.
Out of 403 million mobile holder of which 46 percent did not have bank accounts as at June 2009. Everyone has a passion (or is it fashion) in recent years that rural and inclusive growth agenda must continue inspite of financial crisis or global situation becoming hostile. If India has to pursue a vibrant economy, inclusive growth is vital and singularly decisive. This warrants providing affordable clean drinking water, which shall improve the health of an important segment of community and wholesome package of security measures.
Despite of hurdles, services in rural banking must be made available at a lesser cost and least cumbersome procedures. Term landing and other financial institutions must be pursuaded to extend cheaper funds for investment in infrastructure like roads, water supply, educational institutions etc in rural areas. RBI must utilize business correspondents, Local Area Banks, RRB to cover the remotest areas.
In nutshell, the objectives of the government, RBI, Banking and financial institutions ought to be to bring over 700 million rural Indians within the main frame of economic growth which must have a cascading positive impact on the lives of the poor to move out of poverty and improve their quality of life.
However, financial sector ensure to take care that they do not push the farmers into a debt trap, or charging higher rate of penal interest on delayed repayments arising out of circumstances which are beyond the comprehension of the small borrowers both in rural and urban areas; or not to indulge in depreciating the value of principal assets; and by simplifying the whole gamut of lending and repayment procedure.
Government must also ensure to create parallel institutions “of the, by the and for the” poor so as to channel food and other BPL entitlements. This could be achieved through SHGs that are experienced in distributing PDS grains, BPL cards or NREGA cards which can if implemented properly, timely and adequately, be very effective in alliavating the poverty impact. Similarly food coupon system may be introduced as an universal programme throughout India which may facilitate to a great extent to remove some of the ills that plague India’s targeted PDS, by enabling the households directly securing the food in exchange for coupons thus avoiding corruption and middlemen menace which pervade the PDS at present. This may also help to minimize the exclusion errors of genuinely poor segment; reduce the number of ghost / absentee cards; avoid leakage at fair price shops; and finally ensure the quality of food distribution.
Studies made revealed that with regard to raising the quality of life of the poorest in India can be improved by adopting market based solution for inclusion of the targeted groups. In this direction, if efforts an made to engage the services of a wide spectrum of organizations, including NGOs and corporate sectors, it may serve as an innovative device for development of the poverty – stricken people into the future. However, such an effort may succeed if the government takes serious policy initiative towards financial inclusion, to secure inclusion, to secure a sustainable livelihood to the poorest coupled with sustainable growth and improved access to such people to enjoy the fruits of continued economic and social sector growth. They must have entry into the sphere of universal healthcare, education, food security, water and sanitation and renewable energy provisions. However, it can be achieved only when rural and urban poor have enhanced their buying power to meet their minimum aspirations through local solutions. Micro – financing with active participation of private sector can work wonders in this regard, provided such micro financing are not burdened with cap on lending rates which may scare away financing agencies. Cost benefit analysis must be the logic to derive at a reasonable pricing on these transactions.- Continued in next issue
THE REMEDIES - (read our Jan. issue)
Author is Former General Manager of Vijaya Bank
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