ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by N A MujumdarSubscribe to N A Mujumdar

Centrality of Agriculture to India's Economic Development

Indian agriculture faces a far more complex set of problems in the new millennium. They are however of a new genre. Our vision of agricultural growth in the new millennium is that it should be a means of achieving the broader objectives of food security, employment-led growth and poverty reduction.

Rural Development: New Perceptions

The mountain of foodgrain stocks is just one of the consequences of the misguided macroeconomic policies of the 1990. Caught up in the euphoria of liberalisation, the new economic policy largely ignored the rural economy and its development. Fortunately, since 2000-01, there has been a new-found interest in resurrecting the agenda of rural development adopting a comprehensive and pragmatic approach.

Small Savings and Market Mythology

The report of the Reddy Committee advocates market-determined interest rates on small savings, which it says are "high cost borrowings" for the government. In recommending reduction of interest rates on such schemes, the committee has overlooked the nub of the problem, namely, the government's fiscal profligacy gobbling up huge resources. Besides, fluctuating yields cause uncertainty for the small investor and can adversely affect growth.

Reviving Rural Credit

Notwithstanding the commendable initiatives of the United Front government in 1996 to revive the rural credit system, it continues to languish. What is required is a structural transformation linking banks and co-operative credit institutions with self-help groups and NGOs.

Reviving Rural Credit

Notwithstanding the commendable initiatives of the United Front government in 1996 to revive the rural credit system, it continues to languish. What is required is a structural transformation linking banks and co-operative credit institutions with self-help groups and NGOs.

Investment in Agriculture and the Globalisation Syndrome

Investment in Agriculture and the Globalisation Syndrome N A Mujumdar Studies in Agricultural Investments and Rural Savings by B D Dhawan; Commonwealth Publishers, New Delhi, 1998; pp 236, Rs 425.

Banking Sector Reforms Second Coming

N A Mujumdar ARE we suffering from reforms fatigue? That could be one possible explanation why the report of the Committee on Banking Sector Reforms (BSR) submitted in April 1998 has not attracted as much attention as the report of the Committee on Financial System (CFS) submitted in November 1991, Interestingly enough, both the committees were chaired by M Narasimham and if there were apprehensions that the BSR report would largely regurgitate the issues in the CFS report, they are entirely unjustified, The fact that, the major recommendations of the CFS report were guided by the availability, as it were, of the Washington or Basle software, rather than India-specific issues, has been concretely demonstrated earlier. ' This article seeks to show that the BSR report is no different, The most conspicuous weakness of the BSR report is its failure to diagnose the core problem currently being faced by public sector banks (PSBs): they have become largely dysfunctional virtually abdicating normal banking responsibilities. That explains the present paradox of high liquidity coexisting with large unsatisfied demand for credit. While the banking system's resources go abegging, the economy ' s growth potential remains not fully exploited. That is the tragedy of PSBs. Unless this core problem is tackled first, the second dose of banking reforms recommended by the BSR report would lose much of its relevance, The same lack of imaginativeness is also reflected in the recommendations relating to non-performing assets (NPAs) and rural credit. Although the report begins by making appropriate noises about an efficient financial system being critical "to support higher investment levels and accentuate growth" (p I), sadly, the growth perspective is missing from the major recommendations. If the Reserve Bank of India (RBI) were to draw up a meaningful agenda for making PSBs subserve the growth objectives, it has to look elsewhere for advice.

Credit Support to Priority Sectors-A Macro Perspective

Credit Support to Priority Sectors A Macro Perspective N A Mujumdar THERE are at least three reasons why at this point of time, a fresh look at the issues pertaining to the flow of credit to priority sectors is warranted. First, the period 1991-96, constituting the first phase of financial sector reforms was a period of 'policy vacuum' so far as priority sectors are concerned. Commercial banks defaulted merrily on the priority sector credit target of 40 per cent of net bank credit, as also on the subtarget of 18 per cent credit to agriculture. The size of credit flowing to the small-scale industries sector also shrank. The Reserve Bank of India (RBI) winked at the default and maintained a studied silence on the default till July 1996, when the UF government announced, in its first budget, a number of initiatives to accelerate the flow of rural credit. At long last, public sector banks managed to achieve the credit target only in 1996-97, While credit to priority sectors at 41.7 per cent of net bank credit exceeded the target, the subtarget continued to remain unfulfilled. Credit to agriculture was at 16.4 per cent, What is more, the reform package has affected adversely the apriority sectors in another area, namely, interest rates: with the freeing of banks' lending and deposits rates, the new interest rate structure that has emerged, has become highly regressive and is biased against priority sectors. Secondly, the Approach Paper to the Ninth Plan (1997-2002) does accord high priority to agriculture and rural development activities in general, in the strategy for future growth. It is therefore only appropriate that, monetary and credit policies would need to be modified in such a manner that they are in broad alignment with the priorities of the Ninth Plan, Looked at from this angle, credit policy has yet to react to the Ninth Plan priorities. The question that therefore needs to be considered is: what are the ingredients that need to be added to the credit policy mix? Thirdly, winds of change appear to be blowing in the RBI in the post-November 1997 phase. The RBI appears to have recovered from its amnesia of rural credit; the setting up in December 1997 of two high-level one-man committees to look into the problems impeding the flow of credit to agricultural and small-scale industries sectors, respectively, is a concrete demonstration of this change. The resurrection of the RBI's involvement in rural credit thus marks the end of the 'policy vacuum' phase.

Overhauling the Somnolent Rural Credit System

N A Mujumdar While the United Front government's initiatives with regard to revitalising and expanding rural credit are welcome and necessary, they do not tackle the twin problems confronting the rural credit delivery system: high transaction cost and poor repayment performance.

Food Security, Price Stability and the Budget

This paper addresses three interrelated medium-term issues arising, directly or indirectly, out of the central budget for 1997-98: price stability, food security and internal debt management. The government had waxed eloquent in 1995-96 about rice and wheat emerging as major export commodities and about the proper use of 'surplus foodgrains'. But even before 1996 was out we were compelled to arrange emergency import of two million tonnes of wheat. This has exposed the vulnerability of the economy in terms of food security and highlighted the importance of supply-side factors in sustaining price stability. While inflation cannot be controlled by a one-point programme of controlling money supply, containing the extent of monetisation of the budget deficit is critical to sustaining price stability. In this context the abolition of Ad Hoc Treasury Bills from April 1, 1997 has been hailed as a systematic change, but in the ultimate analysis what matters is not the mechanics of monetisation of the budget deficit as the political will to observe fiscal prudence.

Public Policy and the Financial System-A Dilemma of Two Cultures

Public Policy and the Financial System A Dilemma of Two Cultures N A Mujumdar The financial sector reforms introduced as part of economic liberalisation have done the economy more harm than good. Any reforms that we introduce must he judged by the test of their relevance to the specific Indian socio-economic milieu, and the 1991-96 reforms fail this test. The initiatives taken by the United Front government appear to appreciate this point.


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