Indias major initiatives target inclusive growth: P. Chidambaram
September 26th, 2008 - 3:28 pm ICT by ANI - Send to a friend:
New York , Sept 26 (ANI): Union Finance Minister P. Chidambaram has said that the country has taken major initiatives in agriculture and rural development, in industry and urban development, in infrastructure and services, and in education and healthcare, aimed at promoting inclusive growth.
He said this at the round table on Poverty and Hunger during the high-level event on the Millennium Development Goals convened by the Secretary-General and the President of the General Assembly at the United Nations Ban Ki-moon in New York on Thursday.
During his intervention, the Finance Minister expressed concern that in sub-Saharan Africa 41.1 per cent of people were still living in extreme poverty in 2004 and the poverty gap ratio was the highest in the world.
He pointed out that around 8.9 percent growth rate for the past four years has allowed India to make considerable progress in the eradication of extreme poverty.
Though the country still has more than a quarter of population surviving on less than one dollar a day, it recognizes that economic growth must be socially inclusive and regionally balanced, Chidambaram added.
He mentioned that the Government is investing huge sums in rural infrastructure through schemes like the National Rural Employment Guarantee Act and Bharat Nirman.
On an argument that blamed large developing countries over-consumption for increased food costs, Chidambaram said: Nothing could be further from the truth. Developing countries continue to have high child malnutrition levels and still need to battle chronic hunger. In India , in-fact, this is a major issue and our Eleventh Five Year Plan aims at reduction in malnutrition among children of age group 03 to half from its present levels.
To prevent food shortages and continuing hunger in the developing world in particular, there is a need for a quantum leap in agricultural productivity, food grain output and farm incomes in the developing countries, he added
He expressed confidence that the world has enough resources and ability to cope with this crisis.
Despite many developed countries having increased their Official Development Assistance (ODA), the imperative to reach the goal of 0.7 per cent of Gross National Income on an urgent basis cannot be overstated, he further said.
Welcoming the initiative of the UN and other agencies, he urged for an urgent and collective global partnership to translate commitment into concrete action in the interest of worlds future generations. (ANI)
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- - eradication
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- - farm incomes
- - five year plan
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- - millennium development goals
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September 27th, 2008 at 10:24 pm
Islamic Banking for Inclusive Growth
Syed Zahid Ahmad
Besides religious, social, political and diplomatic reforms, Islamic banking is more desired for Inclusive growth of India. It is interesting to evaluate probable impact of Islamic banking in different segments of Indian economy. Islamic Banking is the only mechanism which seems capable to tame the liquidity and inflation problems along with allowing inclusive growth. The increased percentage share in GDP by agriculture or manufacturing industry, or per capita income growth is just not indicative of true inclusive growth. For real inclusive growth, we have to ensure increase in income and employment status of workers in all segments. Empirical evidences reveals that though India has registered better growth rate in recent years, the number of poor living below poverty line has increased. Our household consumption which has declined in recent years is driven by household income; while corporate savings reflects income of corporate sector which has increased. In fact with better GDP growth rate in recent years, our corporate sector has snatched the fruits of growth, while majority of work force have failed to enjoy the fruits of development.
Similarly the share of financial sector in GDP has increased in recent years. Since our SCBs extend debt finance, the credits extended by SCBs add interest as part of GDP cost which causes inflation. While under equity finance, credit cost being zero, the growth of credit share to GDP does not push cost of GDP, thus restricts inflation. Simultaneously the dividend shared by depositors on equity finance helps equitable distribution of income generated by financial sector. Thus instead of concentration of credit to corporate sector, the generated income is shared by household sector which increases level of consumption and pushes the economy on faster growth track. This basic difference between debt and equity credit needs attention of our financial sector regulators.
Their financial background (in lack of collaterals) of farmers and poor workers associated to unorganized sector manufacturing and retail industries do not encourage SCBs to extend more debt finances. With schemes of loan waiving, the debt market is more dried for SCBs in agriculture sector. Even the SHGs and JLG schemes of Micro Finance are failed to add livelihood stocks for poor and vulnerable. This low tendency of economic reforms by financial sector for majority of Indian workers is creating imbalance in growth trend. India’s GDP is increasing with increase in number of poor living below poverty line. The fruits of growth are really not shared among Indian nationals, but among Indian sectors. This fact needs attention of policy makers and regulators to launch better financial instruments / banking mechanism to ensure worthiness of credit supply to the needy segment of our economy. Insight on Islamic banking reveals its potential to build infrastructure for our agriculture sector where workers are incapable to add infrastructure due to poor financial risk capacity, thus suffers a lot in productivity and economies of scale. Islamic banking could also help our unorganized sector manufacturing and retail industries avail equity finance to arrange capital required to compete with formal sector industries. These financial needs could not be fulfilled without Islamic banking because the financial vulnerability and low financial risks capacity of workers requires equity finance instead of debt finance which is neither provided by SCBs nor by MFIs because all credits by SCBs and MFIs are interest based.
If Islamic Banking is allowed the inadequate labour capital ratio for informal sector workers associated with agriculture and manufacturing industries could be resolved through equity finance which might be a revolution is our agriculture and unorganized sector. With improved labour capital ratio, our poor and vulnerable workers associated with agriculture and unorganized sector might be able to compete with the formal sector workers with increased productivity. Thus Islamic Banking may financially empower over 90% Indian workers associated to agriculture and unorganized sector manufacturing and retail industries. Islamic banking may induce our political leaders to substitute grants and subsidies with equity finance schemes through specialized financial institutions because equity finance allows access to credit without adding debts to borrowers. Equity Finance helps achieve self-reliability, required for growth, which never comes through grant and subsidies but with successful utilization of equity finance. The stabilization funds for poor farmers / artisans may be utilized to experiment such finance. Islamic banking may not be a religion based banking business, but it could well resolve our real economic problems.