Highest fin inclusion in Kerala; see 25-50 bps cut: Crisil

In a computation of financial inclusion in 632 districts across India, ratings agency Crisil found financial inclusion in Pondicherry, Chandigarh and Kerala to be the highest while financial inclusion in Manipur, Nagaland and Bihar was the lowest, says Crisil MD and CEO Roopa Kudva.

Also Read: India to lift FDI cap in some sectors by July third week: Chidambaram In an interview to CNBC-TV18, Roopa Kudva estimates that in FY14, economic growth will move up, GDP growth rate will touch 6 percent and the rupee will settle at 56. "I expect the rural economy to do well and see the central bank announce another rate cut of 25-50 bps." Below is the edited transcript of the interview on CNBC-TV18 Q: Which are the worst performing states on the financial inclusion index and how do public and private sector banks fare?
A: In this additional exercise of Crisil Inclusix, what we have done is to compute financial inclusion at the level of each of the 632 districts in the country.
The index methodology is such that not only can it be computed at the level of each district it can be computed for each state and it can be computed for each region in the country, and also of course at the national level.
The methodology also enables us to compute the financial inclusion score for each bank. What we have done at this point however is done it at the district level. As and when we complete the exercise for individual banks we will be in a position to talk about it.
Coming to the states, and on which ones are performing better and which ones are coming out with lower scores the all India average score is 40.1 on the CRISIL Inclusix. The three states which are rated the highest or have the highest score are Pondicherry,Chandigarh and Kerala, and the ones with the lowest scores are Manipur, Nagaland and Bihar. These are three things that distinguish the states which are coming out with the lowest scores – be it on the penetration of branches per lakh of population or be it in the number of savings deposit accounts per lakh of population, and most importantly, in the number of loan accounts per lakh of population.
These three states are scoring the lowest in the country, and particularly low is their score on credit accounts as a percentage of the population in that state. Q: It is a very interesting study. However, to talk about the macros - Fitch has changed its outlook for India's sovereign ratings to stable while S&P has maintained its outlook. Has the threat of a downgrade to your mind now eased or does it persist given the twin deficits and especially given the current account deficit (CAD)?
A: I can't comment on the sovereign rating because that is not something that Crisil does but I can comment on the outlook that we have for the economy and what the key issues that the economy is facing at this point are.
The first is the issue of economic growth. We are forecasting that economic growth in the fiscal 2013-2014 we will move up from last years levels, and we are predicting a gross domestic product (GDP) growth rate of 6 percent. This growth is largely predicated on a good monsoon and the expectation that agricultural growth will return to trend. We are expecting to see some modest increase in industry and services remaining more or less flat.
We also expect that this pick up in growth will be driven by some uplift in consumption which will arise on account of the facts that salaries and incomes will rise at a faster pace than inflation because inflation has started coming down.
There is expectation of rural economy to do well if we have a good monsoon and finally, the election spending as election gets closer will also add to consumption spending in the economy. Q: Weak rupee is constricting the Reserve Bank of India (RBIs) monetary policy space. The markets expect at least two more rate cuts this year or at least are hoping for two more rate cuts. Do you see that happening?
A: We are forecasting that the RBI will do another 25-50 basis points (bps) rate cuts in multi-steps before March 2014.