Coordinated Approach at District Level Needed for Inclusion for the Last...

June 2021


The times are bad, very bad. Last year, with a drastic national lockdown, India chose to save lives over livelihoods. This year, the count of lives lost is growing and livelihoods are severely strained again, as the second wave with new virus variants engulfs the country. The State of Working India 2021 brought out by Azim Premji University reveals the deep impact that the pandemic is making on existing inequalities, there is increased informality as businesses fail to recover, a sharp rise in poverty, and soaring food insecurity, with women bearing a disproportionately higher burden. While the government schemes have started again ( additional foodgrains for poor households for the next two months), the damage to productivity and incomes will have long-lasting impacts. Even now, while several of the high-frequency indicators gave satisfactory growth in April, there is uncertainty about how they will pan out over this quarter, as local restrictions are imposed across the country. For instance, GST collections hit a record high in April, even as e-way bills dropped to levels of last July. The only positive news coming through is on the agricultural front – after a record Kharif harvest, the forecast for a normal monsoon should help cushion rural India to some extent.

Major macro-economic parameters for May 2021 continue to reveal that the economy has been deeply hit by the second wave, though they are seen to be stabilizing in June. The Markit PMI Services index reporting a contraction for the first time in eight months in May; the PMI Manufacturing index just about stayed in the expansion zone, but was the lowest in ten months; the unemployment rate rose further in May  as per CMIE data; GST collections dipped compared to April but stayed above the INR one lakh crore for the eighth consecutive month.

The demand for jobs has been high and  MGNREGS has been working, despite casualities amongst staff from Covid-19. The Supreme Court has also lent its weight behind the One Nation One Ration Card scheme and has called for States and UTs to implement the scheme. The Union government has extended the free rations scheme to poor households till the end of this year. With a good monsoon forecast, record procurement of wheat already and hike in MSPs for the kharif crop, rural incomes should get some support.

However, the pace of vaccination has not picked up and unlocking will be measured across the country, keeping downside risks high. Statements by key decisionmakers suggest that this should change soon, though no official commitment is yet available.

The RBI has also given more relief after its  June Monetary Policy Committee meeting, including increased liquidity support to SIDBI and contact-intensive sectors, expanding the threshold limit under Resolution 2.0, and announcing the operation of the National Automated Clearing House (NACH) on all days of the week, which will smooth Direct Benefit Transfer payouts.

UNDP has released its  assessment of the Aspirational Districts Programme. While progress in these districts has been lauded, the report calls for more attention to financial inclusion and skill development, which have been moving ahead at a slower pace than the other indicators. Part of the problem is the absence of a dedicated department (unlike healthcare, for example) and poor coordination at the district level. The overall lack of trust and comfort with the banking channel was also highlighted as a challenge to overcome, and the deployment of women agents in Ranchi district was mentioned as one of the solutions.

The RBI Working Group on Digital Lending constituted in January of this year is yet to release its report, meanwhile read V. Anantha Nageswaran and Badal Malick ( Mint, 7th June 2021) giving six choices and approaches that lenders must take for sustainable and profitable financial services to the underserved. The authors make the key point that responsible fintech and good governance are pre-requisites that will “ not only lower greatly the burden on already-stretched regulators, but also avert a situation of regulatory overkill that could apply indiscriminately to all players.”

Do also read the Indicus White Paper on Digital Lending in India, which lists out the issues and challenges and puts forth specific actionable points for all stakeholders - NBFCs/banks, platforms like Google and Apple, the regulator and the borrowers.

Some Other Highlights

•     The RBI has released a Consultative Document on Regulation of Microfinance, requesting feedback from the public by July 31, 2021.
•    MicroSave  reports on the impact of the pandemic and lockdown in 2020 on low-income households and evaluates the impact of the Pradhan Mantri Garib Kalyan Yojana.
•    A report on the  Public Distribution System by MicroSave shows how food reached the needy despite stringent lockdowns.
•    Dvara continues its series on exclusions in Direct Benefit Transfers – read  how data entry error leads to failure of cash transfer in PM-KISAN.
•    Ajay Bhushan Pandey writes on the  digital payments boom enabling financial inclusion in India.
•    Ram Rastogi  analyses the drop in payments in UPI in May.
•    The RBI raises  interchange fees for ATMs, revised upwards for the first time since 2014
•    Sophie Falsini of CGAP explains that  time is money for rural women and financial services can help rural women save more of it.
•    Sumita Kale and Prashant Girbane write on the  need for a coordinated drive at the Ministry of MSME for digitalization.
•    Rina Chandran brings out  the existing issues in digital lending apps, that may still miss out on providing credit to the traditionally underserved segments, especially women.

Editor: The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. ©Indicus Centre for Financial Inclusion. All rights reserved. 4thJanuary 2019

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