Sudip Bandyopadhyay’s Blog

Albert Maslow postulated hierarchy of needs.  With gradual improvements in our financial status, our needs keep changing.  At different levels of economic development, the priorities are different.  Water borne diseases may be important at a certain level to income, lifestyle diseases at another.

In his brilliant book, “The Hungry Tide”, Amitav Ghosh explores the fascinating delta of Sunderbans in West Bengal and unfolds the mystical quality of life and natural beauty of this area.  The elite population of the world, post this work of Ghosh, is now aware of the beauty of Sunderbans which is undeniably captivating.  However, the quality of life for the poor residents of this corner of the country continues to remain pathetic.  There has been no development whatsoever for the past 100 years and all proposals for development of tourism in this area have been scuttled by concerned environmentalists not willing to disturb the fragile eco-system of the area.

May be its time to pause and ponder over the impact of our environmental crusade on the lives of poor tribals and residents of places like Sunderbans.  Are we morally and ethically correct in preventing development in the under-developed areas in the name of environment.

Yes the tribals need to be consulted on how exploitation of mineral resource is planned, but by allowing environmentalists to prevent exploitation of mineral resources or travel and tourism development in backward areas we are ensuring that these pockets remain green without becoming rich.  We are imposing environmental standards on backward areas without considering whether the trade-off is in favour of the local population. At our level of development, are we ready for these luxuries?  We need to probably work towards increase of per capita income in these remote under developed areas before beginning to attach such premium to environment. Environmental cost needs to be weighed against the Social and Economic cost of underdevelopment of a vast area of the country.

Rapid economic growth over the past decade or so has had its welcome trickle-down effect in rural India , with a healthy growth in income. Better connectivity – both roads and telecom with cities and electrification have boosted productivity and brought hitherto urban-only products and services to rural doorsteps, fuelling a consumption boom that famously saved many a big-ticket marketer from the global economic crisis-led demand slowdown in cities in 2008-09. Inclusive government policies, like the rural job scheme, loan waivers and better prices for crops acted as stress mitigators wherever markets failed to deliver or were absent.  Microfinance and organized retail, currently limited in reach, have demonstrated the multiplier effect of reaching directly to rural consumers and producers in lifting rural incomes and productivity.

Financial inclusion has become a buzz word in the government and media circles.  All efforts in this area are directed towards either providing micro finance or spreading the reach of the banking sector to cater to the unbanked population in the rural areas.  However a  significant component of financial inclusion,providing adequate avenues for investment of savings, is neither available to the rural population nor is being talked about.

5,93,731 villages in India contains 815 million people comprising of 151 million households.  They represent 70% of Indian population and 56% of  national income.  Even if we exclude the population below the poverty line and rural poor ,33.4% of Indian middle class stay in villages and rural India generates 33% of national savings.  To ignore this market as irrelevant and insignificant is definitely not appropriate from the corporate India’s point of view in the medium to long term.

Unless rural India  is provided with adequate investment avenues almost at par with urban India, the vicious circle of under development  and poverty cannot be broken. Savings of Rural India needs to be deployed in productive assets which should generate handsome gains for the savers. The power of saving and compounding should start providing rural folks real good gains. Deployment of savings in Bank Deposits or Post Office Savings will not enhance their wealth. Also lure of high returns should not draw them towards dubious schemes.

There is a crying need for a conscious continuous effort to take financial services distribution to the villages in a cost effective manner to cater to this segment of the population.  The proponents of financial inclusion should definitely start taking concrete steps towards achieving this above goal.