It is evident that the otherwise fast growing state of Bihar lags far behind in many of the critical human development indicators. The benefit of the base effect is giving a high growth rate to the state. What is important is that the focus of the state policy needs to shift to human development
Bihar’s success story has been hitting headlines very frequently in the recent past. The story going around in various sections of the media is that Bihar is the fastest growing state of the country, even outperforming traditionally fast growing states like Maharashtra, Tamil Nadu and Gujarat. This fact gets substantiated in the recent Economic Survey. In the Economic Survey (2011-12) presented in the Parliament, it has been mentioned that in 2011-12 Bihar’s GDP grew at a rate of 16.71% which is just double of Gujarat that grew at 8.20%. The Survey also mentions that the growth in Bihar during the period of 2005-06 to 2011-12 was 10.17%, higher than Gujarat once again (refer to the data in the table below).The per capita income growth in Bihar was also 15.44% which sounds impressive by any standard. While on the growth front Bihar’s performance has been terrific without doubt, on development front the state has failed to perform and continues to be a nadir. Bihar’s success story has in fact brought the growth versus development debate once again at the fore. Is growth in itself enough? Does growth take care of all sections of population and does trickledown effect always works?
Institutions like the World Bank and IMF have been found emphasizing the need for development more than growth. The development focus in recent times has moved to the human development index. It is pertinent to note that growth is a quantitative measure while development is more of a qualitative measure of how an economy has performed. Needless to say, concepts like the Human Development Index and the performance based on this is being used as the parameter for tracking development of economies.
Let us look at the development aspect in the context of Bihar. The same Economic Survey which presents a rosy picture of Bihar in terms of growth presents a completely contradictory picture in context of development. Some startling facts coming out of the Economic Survey about Bihar are as follows:
It is clearly evident that the otherwise fast growing state of Bihar lags far behind in many of the critical human development indicators. The benefit of the base effect is giving a high growth rate to the state. Bihar has a GDP which is around one-fourth of Maharashtra and hence the base effect will continue to benefit the state in the years to as far as economic growth is concerned, while development may not happen naturally because of growth. What is important is that the focus of the state policy needs to shift to human development. More focus needs to be on spreading health access to common man, making agriculture more productive, and emphasis on education especially on primary education. The government also needs to rope in private sector for more employment generation. Bihar needs to develop not just grow.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)
Education is no more a charity, it is a big business. Despite earning huge income, most educational institutions enjoy tax exemption since they are registered as charitable trust. Can we plug this loophole, asks Prof Anil Agashe?
Dear Finance Minister,
This is not regarding your budget. It is about a big tax avoidance scam that is not a scam simply because it has the sanction of the law of the land. You have also made it clear that tax evaders are being sent notices and they better declare incomes and pay tax. But what do we do about tax laws that allow tax avoidance or evasion it really does not matter. What matters is the country is being taken for a ride.
Most educational institutions are registered as “charitable trusts” in our country and because of this all their income is exempt from tax. What a noble idea indeed Sirji! May be this was fine at the time of independence. In that era there were mad people who were running educational institutes as a patriotic duty.
Things have changed beyond recognition since then. Now education is a big business. Many politicians have jumped on this bandwagon because it is a great vehicle to grab land free or at throw away prices all over the country. Many private institutes and even universities have sprung up which are covertly or overtly backed by politicians of all hues. This is an admirable quality amongst your clan, you fight with each other constantly, ostensibly for the good of the country and we the unfortunate citizens, but when a money making opportunity arises you close ranks.
As I understand that an institution is charitable only as long as it is doing charity of some kind. Educational institutes that charge huge fees and run professional courses and do this with a clear motive of profits, have no business to be called ‘charitable’. There are institutions that make crores of rupees by conducting entrance examinations and sale of prospectus. Is this charity? Should this income not be taxed?
It would be interesting to see what percentage of fees collected by such institutes is spent on academics! In one institute I was told the ratio of payment to faculty to total income was about 2%! What happened to the balance? What charitable things were done? No student gets concession in fees, there are no freeships for poor students either. And best of all many of these institutes are big borrowers, borrowing money from banks to build buildings and to buy computers and books as required by AICTEA.
Now one hears some of these fantastic temples of education do not pay salaries to their employees on time. In Pune I have heard that Sinhgad Institute and Indira Institutes fall under this category. IIPM is a classic case, it does not pay salaries on time, and it even has courage to pay one year’s arrears to their visiting faculties by issuing11 post dated cheques to be deposited at the rate of one cheque per month! And unfortunately we have professors who are willing to go through this humiliation! The faculty and staff have no guts to protest as they fear loss of arrears plus loss of job. This is nothing but exploitation. And Mr Minister the majority of the staff in such institutes may be women! So forget your “Nirbhaya Fund”, how about protecting women who are getting exploited in this organized trade called education?
One reason for thriving of such institutions is the craze for a degree among Indians. That a degree increases the price of a bridegroom in marriage is a proven fact. As a matter of fact many of my students have accepted this and some have even said that we come all the way to Pune and spend so much money because it is an investment that delivers manifold returns once we sell ourselves in the marriage markets!
Sir, this is nothing but money making and profit making business. Schools also are no exception. A play group in a school for two-three year olds who go to school for three-four hours only charges Rs30,000 per year! On the other hand there are government-aided schools where fees are not revised for 25 or more years! Girls irrespective of their parents’ economic status are provided free education in Maharashtra. These girls are dropped to school in chauffer-driven high-end cars! Undergraduate aided colleges charge laughable fees. The students don’t attend classes in college which suits the professors who are overpaid after the Sixth Pay Commission bonanza with no evaluation of performance and guarantee of no punishment for non-performance! These same students attend private coaching classes and pay 10 times more fees to attend them! Many professors in aided colleges actually put in more hours as visiting faculty and were reportedly making more money than their salary. This is an open secret. They are actually not allowed to do this, but then who cares?
So Sir, a humble request education is no more a charity, it is a business that only needs political patronage, which is available in plenty at a cost of course. Please plug this loophole in your taxation policy. And please make sure that the tax is imposed retrospectively, something that you are so fond of! Here is perfect opportunity to do that, which may actually get you even many votes from those who have suffered for years, so it is even politically winnable in an election year!
The women’s bank will pave the way for improving the finances of the entire family, and serve the cause of the whole family admirably. Customer service should take precedent as this new bank can be a trailblazer in taking banking experience to a new orbit of happiness and satisfaction for the women of this country
Finance minister P Chidambaram in his Budget speech asked and said: “Women are at the head of many banks today, including two public sector banks, but there is no bank that exclusively serves women. Can we have a bank that lends mostly to women and women-run businesses, that supports women SHGs and women’s livelihood, that employs predominantly women, and that addresses gender-related aspects of empowerment and financial inclusion? Yes, we can.” He then announced the setting up of India's first women's bank as a public sector bank and provided Rs1,000 crore as initial capital.
In what way exclusive women’s bank is useful?
The idea certainly appealed to women legislators, going by the thumping of the desks by many women MPs including the leader of the opposition, as shown on the TV, during the FM’s announcement. In the long-term interest of empowerment of women and inculcating in them financial literacy, the route proposed by the FM appears to be the best option under the circumstances. Because when women are financially literate, it will certainly pave the way for improving the finances of the entire family, and serve the cause of the whole family admirably. In any case, we are going to have many more banks shortly, as the Reserve Bank of India (RBI) has already announced guidelines for granting licenses to a few more banks in the private sector. If there is a need for more banks in the country as per the assessment of the RBI, why not have one more in the public sector which will cater predominantly to women and serve their needs with sympathy, understanding and concern?
Today, the biggest casualty of computerization of banks is the customer service. In the name of automation, personalized service in most commercial banks has suffered a setback and if a new bank run by women can meet the aspirations of people, specially women, and serve the society by competing with the existing banks in quality of service offered, it is certainly a welcome step in the direction of toning up the entire banking sector. After all women have a natural tendency to handle problems of people with concern and care, and if the same level of care can be extended to the bank’s customers, it will go a long way in improving customer service in all other banks as well.
But setting up a new bank and developing it to a scale and size that spreads its wings pan India will be time consuming, and may take a minimum of ten years to make an impact on the life of women of our country. The lead time required even to set up about 500 branches of this bank with at least one branch in each district may take as much as five years or more, going by the problems faced by the existing banks to set up branches in unbanked areas and to train people to manage these branches. Therefore there is a need to hasten the process of setting up this bank and here are a few suggestions to achieve this objective for the consideration of the government.
Position of female employees in commercial banks in our country:
As on 31 March 2011, the total employee strength of all scheduled commercial banks in the country is said to be 10,50,885 of which females constitute 1,86,784, or just 17.77% of the total employees. You will observe from the following table, regional rural banks (RRBs) have the lowest percentage of female employees, mainly because of low availability of qualified women in rural areas, where the branches of RRBs are predominantly spread out, which calls for providing educational facilities in rural areas a top priority for the government.
Position of employees of all commercial banks as on 31 March 2011 is as under:
|Total employees||Female employees||percentage of females|
|State Bank Group||3,00,628||57,544||19.14|
|Private sector banks||1,71,071||38.297||22.39|
|Regional rural banks||79,886||4,481||5.61|
Source: Basic Statistical Returns of SCBs in India, March 2011 (RBI website)
How to ensure success of the women’s bank?
First and foremost job of the new bank is to have enough trained women employees, who will be able to provide banking services to even the illiterate people of India. In order to speed up the process of setting up branches in rural and semi-urban centres, the best option for the government is to seek the services of female employees on a loan basis in adequate numbers from every public sector bank, so that the new bank is able to get trained and experienced employees to start operating in right earnest, without going through the elaborate process of recruitment, training and skill development. These employees, who opt to work for the new bank can be given the deputation allowance as an incentive for them to move over to the new bank at least for the first three years, where after they can opt to go back to their parent bank or become permanent employees of the new bank.
The next equally important job for the new bank is to set up at lest one branch in every district of our country to begin with, that will provide an all-India presence for the bank and create visibility throughout the country. Though this is a tall order, it is desirable to have branches spread out in as many states as possible, particularly in smaller cities where there is a need to help women who are more conservative and depend on their men folk for their banking requirements.
In order to inculcate a saving habit among the women of our country, it is preferable for the new bank to aggressively go for savings deposits from the entire family with innovative schemes and incentives, which are not provided by the banks at present. This will not only help the bank to keep the costs low, but to the economy as well, as a lot of cash is said to hoarded in the homes of large number of families in the countryside, which can be tapped by the new bank for the general good of our economy.
The new bank should have a totally new business model, which should serve the needs of the society with equanimity and concern for the underprivileged people of our country. It is necessary for the new bank to equip itself with lending to womenfolk against pledge of gold, which is the most prized possession of all women in our country. Today private moneylenders and pawn-brokers do roaring business of lending against gold in all rural areas, and the new bank should, therefore, take upon this task as a challenge to provide loans against gold to all these rural population, who are at the mercy of private money lenders, at reasonable rates of interest, taking due care of the safety of their jewels as well. Besides, the women’s bank should be ready with attractive schemes to encourage girl children to go for higher education by providing education loans at reasonable interest rates, as this can change the face of rural India in the shortest possible time.
What should be the philosophy of the women’s bank?
The need of the hour is to make banking systems and procedures simple, easy and affordable to the common people of our country to make financial inclusion a reality. Today the process of opening a new bank account in any commercial bank is so cumbersome with each bank having its own KYC (know your customer) norms, calling for so many documents. The new bank should make the entire experience of banking as simple as visiting your favourite fast food outlet and walking out with some idlis or wadas. In a nutshell, customer service should take precedent over everything else and this new bank can be a trailblazer in taking banking experience to a new orbit of happiness and satisfaction for the women of this country.
In short, the philosophy of the women’s bank should be to follow both in letter and spirit what Mahatma Gandhi said in his speech in South Africa in 1890 as under:“A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider of our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us the opportunity to do so.”
And that alone can take this new bank to unprecedented heights of glory and pinnacle of success in all its endeavours.
(The author is a banking analyst and he writes for Moneylife under the pen-name ‘Gurpur’)