RBI Governor Raghuram Rajan's strategy of widening and deepening the banking system through payment banks, India Post Bank, small finance banks and strengthening the NBFCs through appropriate regulation and facilitation deserves rich commendation for taking inclusive banking closer. But doubts still prevail over the effective reach of inclusive banking going by the laggard performance of the priority sector credit thus far.
"You have to dream before your dreams can come true." This famous quote of former President APJ Abdul Kalam, who himself turned his dream into a reality as a nuclear scientist and has "ignited" many minds with his ideas, is perhaps the most appropriate theme for present day India aspiring to become an economic and knowledge superpower.It is the culmination of the dreams of 1.2 billion people that has led Prime Minister Narendra Modi to ideate his plan of making the $2 trillion economy a $20 trillion behemoth within the next two decades, eradicating poverty and making India a knowledge society.
In 2015-16 Union Budget, the government enhanced credit target for farm sector by Rs 50,000 crore to Rs 8.5 lakh crore. This was in line with a common perception that farm credit translates into the growth of the national economy. Statistically this might be unfounded, however it is undeniable that the farm sector that constitutes the core of the economy needs to be in focus of banks and other financial institutions.
The Indian economy is largely dependent on cash. Only 5 per cent of the country's personal consumption expenditure is done electronically. A sharp acceleration of economic growth is not possible with such kind of dependence on cash. Overdependence on cash is a major hurdle and a radical thinking and coordinated efforts are needed to take electronic payments system to the masses.
Under the Millennium Development Goals (MDGs), India along with other developing countries, has committed to eradicate extreme poverty. The deadline to achieve the goal is 31st December 2015. However, according to a recent United Nations report, nearly 300 million people still live in extreme poverty in India and face deprivation in terms of access to basic services, including education, health, water and sanitation.
As we embarked on a period of planning after independence, import substitution constituted a major component of India's trade and industrial policies. Planners, more or less, chose to ignore the option of foreign trade as a stimulant of economic growth. This was primarily due to the highly pessimistic view taken on the potential of export earnings.
The Merriam Webster Dictionary defines poverty as "the state of one who lacks a usual or socially acceptable amount of money or material possessions." However, poverty is not simply characterised by a lack of adequate income. It has far reaching implications.
"No One Killed Agriculture" was the cover story of April-June 2012 edition of INCLUSION. It highlighted the plight of farmers and suggested detailed, practical and workable solutions, at the centre of which was availability of formal bank credit. In fact, INCLUSION has been pitching for enhanced formal bank credit to farm sector for more than a decade.