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”.