Banking presence positively impacts the States’ Net States Domestic Product (NSDP) and thus does contribute to the economic development of States. This was revealed in a paper titled ‘Banking Penetration and Growth Dynamics at State Level’ prepared by Raj Rajesh, Smita Sharma, Naveen Kumar, Monika Kathuria and John V. Guria, all economists in the Reserve Bank of India. The study found evidence of linkages between the parameters of banking sector and economic development across the Indian states. Using a Banking Services Outreach Index (BSOI) for the period 1980-81 to 2009-10, it found that there was a wide divergence in banking outreach across the States. It also found that there was no substantial change in relative position of the States in terms of banking outreach in the last decade. Further, the paper found evidence that improvement in per capita income, road connectivity and electrification contribute in fostering banking outreach across the Indian States. Another paper titled ‘Regional Competitiveness: Drivers and Potential Constraints’ by Sadhan Kumar Chattopadhyay, P. Brijesh, Vineet Srivastava, and Rajiv Lochan, also economists in the Reserve Bank, examined the competitiveness of States of India by calculating competitiveness indices for 16 major States of the country using principal component analysis. The results show that Delhi, Tamil Nadu, Maharashtra and Gujarat top the list of competitiveness and Bihar is at the bottom. The results of competitiveness index correlate better with the total factor productivity growth obtained by Production Function Approach. The study also examines the trade openness of the States as it has a direct link with competitiveness. It observes that the rank correlation coefficient between competitiveness and openness is statistically insignificant. However, in respect of openness, Punjab, Delhi and Rajasthan were found to be at the top, while Maharashtra, being one of the most industrialised States was found to be at the bottom. Moreover, most of the industrialised States are found to be import-competing and not export-competing. Overall, a State has a crucial role to play in achieving higher productivity, efficiency and export growth. In fact, the competitive processes have to be coordinated by the States as market forces may not be able to achieve proper coordination. On the export front, appropriate policies need to be framed by the Central Government in order to make them internationally competitive. In their paper ‘Regional Dimensions of Informal Finance in India: Issues and Implications,’ the Reserve Bank economists K. Jayanthi Anand, A. K. Shukla, V. Dhanya and T. P. Meite attempted to trace the changes, if any, in the mode of informal channels in recent years. Apart from analysing secondary data, the economists prepared case studies on Tamil Nadu, Gujarat, Kerala and Manipur. The case studies highlighted region specific attributes of informal finance. Results of econometric tests showed that in rural areas coefficient of formal debt was positive whereas coefficient of asset size was insignificant. In sum, the analysis shows that both formal and informal finance coexist in the economy and so long as the formal channel is unable to cover the changing demands from the consumer, informal finance will continue to persist in the economy. Nevertheless, better coverage of formal finance offers choice to the consumers thereby reducing the chances of usurious interest rates by the informal sources. Further, Self Help Groups have, to a great extent, reduced the recourse to money lenders in Kerala, Tamil Nadu and Gujarat. These papers were presented at a conference of economists of the Reserve Bank of India held last week. The conference, which is held every year, was inaugurated by Dr. Subir Gokarn, Deputy Governor of the Reserve Bank. The 2011 conference theme focussed on three inter-related issues through three papers presented by three groups of Reserve Bank economists in a technical session led by one expert and three panelists presenting their views on the themes. Shri Siva Kumar, Managing Director, State Bank of Bikaner and Jaipur, Prof. R.Nagaraj and Prof. K.V. Ramaswamy, both, Professors at the Indira Gandhi Institute of Development Research were invited as experts to the conference. Other panelists comprised heads of some RBI departments and regional offices. The papers will be modified on the basis of comments given by experts and panelists and will be published in due course under the Working Paper Series of the Reserve Bank of India. Alpana Killawala
Chief General Manager Press Release : 2011-2012/997 |
