The High Level Committee on Financial Sector Reforms as constituted by the Planning Commission has received almost all public comments over their draft report and is now busy in preparation of the final report. Expectedly the CFSR may submit the final report in September 2008. It is possible that CFSR may miss some genuine issues related to economic justice and financial stability of the economy in its final report. The approach of the CFSR was not to reform the financial structure for inclusive growth; rather it was to provide acceleration in the existing financial enterprises. Majority of the commentators over CFSR draft report were basically interested to grab economic advantage in possible reforms and were guided by corporate forces. They were interesting to resolve their constraints compared to resolve the financial constraints restricting inclusive growth of India. During the whole process of suggesting financial reforms, the agenda of foster and inclusive growth was left behind debates over derivates and labialisation process.
The draft report reveals that big banking players are feared with liberalisation, while upcoming financial and investment companies are finding scope for making money through derivatives and speculation game. For individuals it was more concern to get tax advantages compared to socio-economic justice. Government is more concerned about finding means to increase revenues. The major economic problems related to banking inflation, stock market fluctuations, under utilisation of savings and capital resources etc. left unresolved because the committee members and commentators were preoccupied with their motive to find scope for their business growth after reforms. There had been hardly any voice for seeking suggestions for foster and inclusive growth with long term stability in the Indian financial sector. It should have been discussed in the report that –
Ø Why our stock markets behave like a casino? What are the forces and practices making it behave it casino?
Ø Why prices are increasing with sign of recession in the market?
Ø Why saving growth rate is increasing with inflation? What should be future saving products for Indian economy to ensure a sustainable growth rate?
Ø What should be the nature of financial products for our farmers, small retailers and artisans associated to agriculture and allied industries, unorganised sector retail and manufacturing industries?
Ø If Islamic Banking and Finance are gaining markets at international level why should India not allow its operation?
Ø Why with highest number of companies listed in Indian stock market, our stock market stands nowhere in comparison to global stock markets?
Ø How agriculture and unorganised sector would raise financial resources in coming years to compete the global market needs?
There were many more genuine questions which needed some focused attention by the committee members which could not find place in the draft report. If CFSR is sincerely making the reform proposals, I would like to know some facts related to following issues.
1. What is the proportion of Indian financial resources in between the organised and the unorganised sector?
2. What proposal has been made to ensure sustainable growth of the stock market?
3. What is the proposal for providing equity finance to unorganised sector?
4. What is the scope of opening up of Islamic Banking and Finance in India, which is bypassing conventional banking in many countries and which may invite trillions dollar investment in India?
5. What are the real term financial constraints restricting inclusive growth of India?
6. What specific banking or financial problems associated to the unorganised sector is taken up under consideration by CFSR?
7. What is future financial product for farmers and artisans to avoid suicide cases?, and
8. What are the expected benefits of CFSR recommendations to achieve inclusive growth?
The financial and economic plight of unorganised sector workers need serious and sincere efforts by our planners and policy makers because despite 60 years of independence, our financial sector and ministries are governed by few capitalists belonging to the corporate sector. We have hardly seen any representation of the unorganised sector in making reforms processes. If we really wish inclusive growth of India, we have to focus our efforts to resolve the problems associated with the unorganised sector where around 94% Indian workers are making their livelihood. Moreover, we have to ensure that our maximum savings should be converted into capital through investments in equities. Moreover we have to adopt some practices to ensure fair trade in stock market and prevent amoral game by traders and agencies.
Without financial sector reforms in the unorganised sector we may not be able to help majority of Indians. If we wish to see India grow in inclusive manner, we need to have financial reforms suitable for the unorganised sector which constitute over 94% Indian workers. The reforms in formal sector will not help reduce poverty and income disparity. The analyst needs freedom to analyse various possible modules and mechanisms to control the monetary and fiscal system of our economy. We need to adopt such mechanism which is anti inflationary and equitable in nature. Such mechanism is preached by Islam, but we need to analyse those preaches and visualise the scope in all segments and sectors of our economy.