First of all, a catastrophic crisis like Sub-prime, which luckily did not impact India should not welcome us in the future. Yes it was a blessing in disguise that Indian banks did not went for vehement trading in debt instruments. Financial reforms spearheaded by Dr. Manmohan Singh were checked by the Leftists. But, nobody would like India to keep restraining itself. Rather, it would be better to ensure proper vigilance and then proceed.
Financial Inclusion means finance for all. Given the fact that by World Bank estimates in 2005, India had 42 percent population living on less than Rs. 21 a day in Urban areas and Rs. 14 a day in Rural areas, there is a wide scope to improve. Suppose, we work and are able to achieve our goal in coming years, then it will not only improve economic conditions, but also increase reliance of Indian economy on its own population. Thus, a sense of inclusive economy could be seen there.
Better said than done, it's a myriad task to ensure food, shelter, work for all. Microfinance, an innovative step in this regard has been doing well. Two common methods of Microfinance are : SBLP (Self help group - Bank Linkage Programme) and MFIs (Micro Finance Institutions). India has over 800 MFIs, out of which a handful have large operations. Their penetration is quite high in regions like Tamil Nadu and Andhra Pradesh. Now, they are expanding to northern regions also.
Many banks are providing loans to MFIs for lending to SHGs. A debatable issue is the rate (around 20 percent) at which the money is lent to poor people. Is that too much knowing the fact that Bank rate is around 12 percent? Should we not take risk of losing money into account ? Unlike prime debtors, poor people do not have any collateral. Nor do they have any specific place to stay. Thus, the money is lent to a team of peers to force timely repayment.
In spite of this development, the crux of the problem lies in shortage of resources in rural areas. Few want to be a first mover and go to villages, establish some basic necessities there. Most of the population is employed in agriculture. It's disheartening to see that people are demotivated to continue growing crops and rather sell their lands for hefty amount. If food price inflation is anything to go by, this attitude does not augur well for future.
Agriculture is not finding its saviour yet. Unpredictable weather, pests which affect crops severely are a deterrent. Why not have crops insured then ? Well, Govt. agency has been doing so. But it needs participation from private players with a well defined and flawless model. The idea is to create win-win situation at every sides in order to encourage entrepreneurial ventures in agriculture.
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