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Composite index needed to measure poverty: RBI Deputy Governor

Team Inclusion

Reserve Bank of India Deputy Governor S S Mundra (left) speaking at the first day of the two-day 39th Skoch Summit in New Delhi.

India needs a new measure to indicate its poverty that reflects the progress, or the lack of it, in the provision of basic necessities like health, education and sanitation for the citizens, Reserve Bank of India Deputy Governor S S Mundra said.

Speaking at the first day of the two-day 39th Skoch Summit here, Mundra, who oversees banking supervision, currency management, financial stability and rural credit at the central bank, said such an index will make delivery of the government welfare schemes and services more meaningful and outcome-oriented. He said India has experimented with many benchmarks to get a grip on poverty, but social sector development would closely mirror the outcomes and an index based on them might help government to use technology to target the deficient areas.

“Even after 68 years of Independence poverty remains India’s largest and most pressing problems,” he said. “Unemployment is at the root of poverty. However, India’s poverty problem is compounded by poor indicators on the level of deprivations.”

Mundra suggested the need for a “composite index” on poverty that gauge the level of human development, the success of the government’s delivery of services as well as citizen empowerment. The basic necessities like health, education and sanitation should form the core of the new composite index.

He said differentiated banking holds out the promise of speeding financial inclusion by taking banking solutions to the doorsteps of rural India by using and applying technologies that can process payments instantly.

He said technology would help spread and accuracy of transactions.

Speaking about priority sector lending, he called on banks to lend a percentage of such lending to the marginal farmer and micro enterprises. At the same time, the compliance norms should be stern. Marginal farmers are the most affected by the lack of credit real-time. Promoting entrepreneurship is essential to poverty eradication. Self-help groups are already creating a level-playing field for women entrepreneurship and deepening of financial inclusion. These are encouraging signs, he added.

Priority sector refers to those sectors of the economy, which may not get timely and adequate credit in the absence of this special dispensation. Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

Sameer Kochhar, Chairman of Skoch Group, said the last-mile delivery of services is the most important aspect that will determine outcomes. “Public expenditure on social sectors has increased substantially in recent years, but the outcomes are lacking. Besides, there are many barriers to market entry and innovation in many spheres of India’s economy. Our society will graduate from dole to development only when we formulate policies that address these areas,” he added.

(Comments are welcome at info@skoch.in)

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