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Financial Inclusion in India – Yet another Ritual or  An Integrated Tool for Poverty Alleviation?
Prof Chowdari PrasadDr B Yerram Raju, Ph.D.,Professor of Finance & RegistrarRegional DirectorAlliance Business School,PRMIA – HyderabadBangalore – 560 068Andhra PradeshEmail:Chowdari.p@absindia.orgyerramr@gmail.comMob: 0091924212464200919885296111Key Words:
 Financial Inclusion, Self Help Groups, Non-Governmental Organisations, Micro Finance, Priority Sector lending, Service Area Approach, Business Correspondents / Facilitators.
1. Introduction:
1.1 Poverty alleviation has perennially been the central theme of governance in India. Beginningwith First Five Year Plan in 1951, resources were deployed on areas like irrigation and energy,agriculture and community development, transport and communications, industrial development,social services, land development and infrastructure. Initially, the growth rates were around 3-4 per cent which gradually touched a peak of over 9 per cent. Despite economic turbulences,financial scams, population growth, natural calamities, wars, political disturbances, Indiawitnessed several achievements in many areas in the last six decades.1.2 The Eleventh Plan (2007-12) document was divided into three volumes viz., (I) InclusiveGrowth (II) Social Sector and (III) Agriculture, Rural Development, Industry, Services andPhysical Infrastructure. It addresses on sustained growth and investment aiming at improvementin the quality of life. The percentage of population below the poverty line has come down from36% in 1993-1994 to 28% in 2004-05 while defining the income level at Rs. 10 per day. This isdisappointing since this line was fixed in 1973-74 when per capita incomes were much lower.1
 
1.3 Eleventh Plan (2007-2012) has, inter alia, the following objectives:-1.Income and Poverty:
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Accelerate GDP growth from 8% to 10% and then maintain at 10% in the nextPlan in order to double the per capita income by 2016-17
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Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of benefits
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Create 70 million new work opportunities
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Reduce educated unemployment to below 5%
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Raise real wage rate of unskilled workers by 20 per cent
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Reduce the headcount ratio of consumption poverty by 10 percentage points2.Education
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Reduce dropout rates of children from elementary school from 52.2% in 2003-2004 to 20% by 2011-2012
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Develop minimum standards of educational attainment in elementary school
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Increase literacy rate for persons of age 7 years or more to 85%
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Lower gender gap in literacy to 10 percentage points
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Increase the percentage of each cohort going to higher education from the present 10% to 15% by the end of the plan3.Health4.Women and Children5.Infrastructure and6.Environment2
 
1.4 According to Report of the Working Group on Competitive Micro-Credit Market in Indiaheaded by Dr Arvind Virmani of Planning Commission (Jan 2007), both institutional and non-institutional channels exist for supply of credit in rural and urban areas. While banks,microfinance institutions and credit cooperatives comprise the institutional channels, landlords,local shopkeepers, traders/suppliers and money lenders constitute the non-institutional channels.Share of informal loans in rural credit went down from 91 per cent in 1951 to 45 per cent in1991. Most of the benefits of this development have gone to relatively better-off people.Around 66 per cent of large farmers are reported to have a deposit account and 44 per cent haveaccess to credit.1.5 Around 87 per cent of marginal farmers / landless labourers do not access credit from theformal system (World-Bank NCAER, 2004). The interest charged by the non-institutionalchannels, on informal loans, ranges from 24 to 60 per cent. In some regions, it is reported to beas high as 120 per cent. In comparison, rates charged by the institutional channels vary between15 and 28 per cent. There is, as such, hardly any competition between the two. Despite this, thenon-institutional channels continue to have sway over micro-credit in India. This is primarilydue to limited outreach of the institutional sector in rural and remote areas. The report concludesthat high economic growth and micro-credit have a good future in India. As the institutionalsector expands, it reduces the need of the poor to approach the informal sector for credit. Bankscould be encouraged to undertake low cost wholesale lending to MFIs and through direct lendingto low income clients.3
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arnobgm

Dear Sir , i am preparing a presentation on failure of finacial inclusion in India & the way forward.Would be grateful if you could send me this document at arnobgm@gmail.com . Regards, Arnob G M

reply08 / 12 / 2009
Prof GURU PRASAD Puttu

sir, just I came across your paper on Financial Inclusion in India - CPBYR. Sir I am very intrested on this paper , can you please send me your paper to my mail Id. pgp4149@gmail.com - Guru Prasad. expecting a early reply from you sir.

reply07 / 11 / 2009
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