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.
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.
To my mind, there cannot be any controversy or debate as to how to achieve inclusive growth. I think the experience of all developed and developing countries as well as India shows that in order to achieve inclusive growth we need to do five things.
Narendra Modi government has set an ambitious target to improve India's ranking in ease of doing business to among the top 50 in the next two years. The goal looks very difficult and ambitious because India is ranked at 142 among 189 countries in the latest World Bank's ease of doing business index. In fact, India's ranking has taken a hit in the recent years. It slipped by 11 spot in the past two years.
More than half of India's 1.25 billion people defecate in the open and more than half of the people in the world who defecate in the open live in India.
The move to establish BRICS bank is meant to provide patient money and risk capital to long term projects and not aimed at challenging the existing multilateral financial institutions like the IMF and the World Bank, the RBI Governor Raghuram Rajan has said in a speech at an event organised in Chicago on Friday by the Chicago Council on Global Affairs.
In December 1967, the then Finance Minister Morarji Desai introduced a new term for bankers, the "Priority Sector" and this term has come to stay in the Indian banking terminology since then.