"Please understand Your Excellency, that
While the world was rah-rah ing about the Indian economic miracle, Arvind Adiga’s brutal depiction of
Shashi Tharoor once pointed out that ‘any truism about
So the million dollar question is, how do we ensure that the ‘dark
The Committee on Financial Inclusion, appointed by the Government of India, defines it as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”
When a bunch of economists met the farmers in Singur to understand why they weren’t willing to sell their land, they said that a large chunk of cash was not very useful to them as they didn’t have the skills and temperament to invest it profitably in non- agricultural uses. They were worried that a lump sum received from selling the land might be frittered away by themselves or family members. The economists concluded that the absence of good insurance mechanisms and financial instruments together with low levels of human capital make switching to alternative occupations costly.[iii]
This case-study offers several lessons for us to understand the Indian perspective on financial inclusion. It helps to understand why our country’s transition from the agriculture sector to the non-agriculture sector is progressing in snail’s pace, having taken us 46 long years to reduce the percentage of GDP dependent on agriculture from 42.8 to 17.5 percent[iv]. The controversial land acquisition dimension in this case study helps us understand the Indian context in the global challenge of establishing capitalism in the developing world, as propounded by the Peruvian economist, Hernando
Soto states that the main problem of development is not that the poor in the third world lack capital, but many lack the legal title to the assets they already hold. This is true especially in the Indian scenario where most of the farmers owning marginal holdings of land, already unable to exploit economies of scale, are further crippled by their inability to monetize or collateralize their property. Singur-Nano debacle also points the depressing fact that in the absence of a formal financial system, land is not just an asset, but a pension plan [v]they could bank on. It’s indeed a shame that even after liberalization; land markets continue to remain shackled. After all only in
Indian Govt. realizing the importance of financial inclusion stated in its 11th five year plan that its major goal is to work for financial inclusion. National Rural Financial Inclusion Plan (NRFIP) was launched with a clear target to achieve complete financial inclusion by 2015. This plan aims to serve fifty percent of the financially excluded (280 mn) population by 2012 through regional and semi-urban branches of commercial and regional rural banks.
Present state of financial inclusion in India
The first step towards taking financial markets to the masses began way back in 1969 when the commercial banks were nationalized. This opened the gates of rural banking to the dark
In the light of these achievements, let us look at where we stand today. In the first-ever index of financial inclusion prepared by ICRIER (International Council For Research on International Economic Relations) to find out the extent of reach of banking services in 100 countries of the world, India has been placed 50th position, ranked below Kenya and Morocco. The Index of Financial Inclusion is based on three basic dimensions: banking penetration, availability of the banking services and usage of the banking system. It is pertinent to note that
The Scope of Financial Inclusion
So what differentiates the Indian scope of financial inclusion from other countries who are progressing towards the same goal?