This Diwali just might see more cheer than expected as the aftermath of the second wave recedes. Several high-frequency indicators have shown a recovery to pre-pandemic levels – the Nomura India Business Resumption Index crossed 100 to an all time high in the last week of September. Unemployment as  tracked by CMIE fell in the rural areas, and demand for  work under MGNREGS was at a 17-month low. And unforeseen rise in energy demand has the government worried about power outages.

Inflationary pressures continue to stay strong,  Sajjid Chinoy and others from JP Morgan have an excellent analysis, with an expectation of continued cost-push and service sector inflation. This will definitely remove some of the shine for the festival ahead. In fact, one of the biggest hits to low-income households has been the rise in the price of LPG cylinders over the past year and drop in subsidy; the government is now reportedly looking  into a new subsidy scheme.

Though overall growth numbers may show a pickup, the pandemic has sharpened existing divides. For instance, larger firms have found it easier to make a comeback while small informal businesses have been devastated. As the government does not collect any data on the closure of businesses, media reports give some idea. Sandeep Soni reports in the  Financial Express on the rise in the number of businesses listing for sale on SMERGERS.

The  All India Debt and Investment Survey 2019, released by the NSSO in September, showed that 35% of rural households had outstanding debt while for urban households, the share stood at 22%. There is  one positive note  : 66% of the credit in rural households came from institutional sources, the highest share ever, up from 29% in 1971. Though there is a long way to go, banking services have definitely deepened in the country.

One of the biggest challenges in giving institutional credit to informal businesses and low-income households has been the lack of data and mechanism to assess their credit-worthiness. This gap is set to be filled with the launch of the  Account Aggregator network , which is the latest game-changer in India’s financial inclusion mission as  small businesses and unserved households will find it easier to access credit now.

Even as the road to open banking and data sharing is being cleared, we find that the RBI is wary of sharing data on financial inclusion. In the September Monthly Bulletin, RBI’s Financial Inclusion and Development Department published  a note on the recently released Financial Inclusion Index. This has some additional information on the methodology of the index, compared to the press release in August, but stops short of even sharing the list of 97 indicators used. The index is of course, an excellent step ahead, but as Sumita Kale and Laveesh Bhandari point out ( Mint, 30th September 2021) much more is needed, on two fronts in particular – gender-disaggregated data and more geographic granularity. From ICFI we hope that the RBI comes through with more details. “Without a spotlight on current gaps, financial service providers have little incentive to frame solutions with an appropriate gender-lens”.

P.S. Do follow our  Indicus Centre for Financial Inclusion  page on Linkedin to continue the conversation on financial inclusion in India.

•     Shri T Rabi Sankar, Deputy Governor, RBI, gave a speech on  Responsible Digital Innovation.
•    Priyanka Iyer writes on the challenges and opportunities from the new rules by RBI on  recurring digital payments, there is also a neat table guiding consumers.
•    CGAP’s Eric Duflos, Daryl Collins, Jayshree Venkatesan, Juan Carlos Izaguirre have shown how  natural language processing (NLP) can be used as one tool by regulators to monitor the digital lending market.
•    Rakshith S. Ponnathpur from Dvara Research sets out analysis on how  micro-credit borrowers availed the Covid-19 debt moratorium.
•    In the first five weeks since its launch, the Ministry of Labour and Employment’s e-SHRAM portal has seen  more than 2.5 crore unorganized workers register.
•    Joep Roest and Yasmin Bin-Humam of CGAP write on  women entrepreneurs are increasingly taking to informal online commerce.
•    MicroSave Consulting has brought out a  case study of shared agent banking in Uganda, which can have lessons for us in India.