For India to be Financially Inclusive and Economically Better, Financial Literacy is a Must
-Laveesh Bhandari,President, Indicus Foundation & Senior Fellow CSEP
"India is yet to take extensive measures to protect their environment like other nations"

Intro: This week Indiastat brings you an exclusive interview of Laveesh Bhandari, President, Indicus Foundation who shares a deeper insight into how India can better stride towards better and sustainable livelihoods via industrial, economic and social reforms in India, as well as through financial literacy and financial inclusion. Speaking to Senior Journalist Mahima Sharma, Laveesh Bhandari who is an empirical economist, environment evangelist and entrepreneur, highlights the fact that as per the World Bank to achieve sustainable economic development, India must focus on public sector reform, infrastructure, agricultural and rural development, removal of land and labour regulations, financial inclusion, spur private investment and exports, education, and public health. He adds that India must do all of this, while ensuring that the environment is improved and not damaged more than it already is. And what all India needs to achieve in the environment sector, to balance this out, forms the deeper insight of this exclusive interaction. Take a read…

MS: On 17 August, the Reserve Bank of India (RBI) unveiled its newly conceptualised Financial Inclusion Index. The intent was to “capture the extent of financial inclusion across the country". For our readers who include students, can you please throw light on FINANCIAL INCLUSION and how far is India from realising the dream of 100%? What steps will need to be taken in this regard?

LB: Financial Inclusion (FI) is simply the access to basic financial products and services at affordable costs. FI can be traced back to the inception of Microfinance in India in 1997. The crux of microfinance was to provide credit and other services to the unbanked or under-banked. The term “financial inclusion” was coined a few years later. The FI Index introduced by the RBI in August last year was a much-needed and long been pending initiative and there was no way to track how far India has come in being financially inclusive. The FI Index figure given was 53.9 for FY 2020-21 as against 43.4 for the period ending March 2017, which shows that we have just crossed the halfway mark in our journey of being 100% financially inclusive. The FI-Index comprises of three broad parameters Access (35% weightage), Usage (45% weightage), and Quality (20% weightage) with each of these consisting of a number of indicators, and the Index data shows that FI-Access is higher than usage and quality, which highlights the need for greater and focused interventions on the demand side of the inclusion effort. However, the RBI did not share data on the components and that did get in the way of any further analysis of the success.

For a financially aware and empowered India, considerable effort and calculated steps need to be taken. To begin with, what is needed is for the consumer to have basic financial literacy along with consistent internet access. As things are shifting to digital at a rapid pace, it makes all the more sense to be digitally (app-tech) aware. Centres for Financial Literacy (CFLs) are being set up at a fast pace with the goal of reaching CFLs in every block of the country. However, till now they don’t appear to be very effective. All these steps, when implemented properly, will lead to a literate and aware populace who can make the ‘usage’ parameter reach the similar scale of ‘access’. To facilitate expansion and deepening of digital transactions that promotes greater FI, creation of necessary digital infrastructure and digital literacy is a necessity.

Coming to BCs, given the crucial role they play in furthering financial inclusion by addressing the last mile disconnect, the issues pertaining to continued availability of BC agents, their capacity building, certification requirements and remuneration related issues need to be addressed proactively. Ease of credit access, particularly to Micro Small and Medium Enterprises (MSMEs), Small and Marginal Farmers (SMFs), women and microcredit segments remain a policy priority. While some successes have no doubt been achieved, improvements in certification, relevant content and adequate payments require significant improvements before they become effective. With greater financial inclusion and increasing digital transactions, it is important to ensure effective and expeditious redressal of grievances which may arise on account of deficiency in services and failed transactions etc., create awareness about, and address issues related to, frauds, cyber security and data protection. While several steps have been taken in these respects by all the regulators, it is only the beginning and they need to be made much more accessible for the poor.

MS: Sustainable livelihoods, industrial, economic and social reforms in India, economic geography and financial inclusion. What's your take on this in terms of economic policies in India? And in easy steps please share how we can achieve the dream of striking a balance among these all?

LB: India, being a welfare state, has to tread the path of economic policies with utmost care. Given its 1.4 billion diverse and ever-growing populace along with being the world’s largest democracy, it can be said that the economic policies formulated over the years have more or less struck a balance in achieving the stated objective along with being accepted by the public in general. Until 1991, successive governments promoted protectionist economic policies, with extensive state intervention and economic regulation. Steadily since 1991, India has been creating improved opportunities for private initiative to deliver on its growth and equity objectives.

Currently, India is simultaneously vigorously involved in all the terms mentioned in the question and pushing for the stated objectives in these domains to be achieved in a sustained and inclusive manner. According to the World Bank, to achieve sustainable economic development, India must focus on public sector reform, infrastructure, agricultural and rural development, removal of land and labour regulations, financial inclusion, spur private investment and exports, education, and public health. It must do all of this, while ensuring that the environment is improved and not damaged more than it already is.

Public sector reforms need a sustained focus along with education and public health. In the last few years, the centre has been focused on divestment of extremely important PSUs to private players despite having the resources and skills to operate those enterprises. Education sector is another domain which requires long-term focus, quality enhancements and investments, which in turn will help develop a strong knowledge and skill base for the country. India definitely is taking the right strides but it is the base that needs to be made strong through focus on all round education that includes basic literacy and skill enhancements at the core.

There has definitely been a pivotal change in India’s economic thinking and it is now based on the principles of growth and efficient welfare, ethical wealth creation, and a virtuous cycle for economic development. Economic growth generates the resources for welfare programs and also improves their efficiency. Programs such as DBTs ensure that the resources are utilised optimally to not only reduce inequality but also to enhance aggregate demand in the economy.

MS: In your words: "India did the unexpected and committed to (a) Net Zero by 2070, (b) reduction in carbon emissions till 2030, (c) greater use of renewable energy by 2030 than targeted previously (d) commit to meeting half of all energy requirements from renewables by 2030 and (e) reduce the carbon intensity of Indian economy to less than 45 per cent from that in 2005 by 2030. This is brave, ambitious, and doable only with extensive reforms across domains." What kind of extensive reforms across various domains are needed in your expert view and opinion?

LB: To do something brave and bring about major changes in any given domain, one has to commit to the objective first. That is the first step, and India has taken it. No doubt, the ambitious commitments made by India will require massive effort and extensive reforms across various intersecting domains, and in no way is it going to be an easy and smooth journey. How India will approach these goals will be decided in the next 4-5 crucial years.

First and foremost, India should keep the main commitment of Net Zero by 2070 as a base in working towards all other major goals mentioned above. The Net Zero target is half a century away and should be brought forward once we have confidence in its achievability.

India has to mainly focus on the reduction in carbon emissions and greater use of renewable energy by 2030 than targeted previously. With respect to reduction in carbon emissions, one way this can work is by making the emitters pay more for polluting, and this includes the government and public sector entities. A national program to eliminate coal power to 5-10 percent of its current levels as early as possible has to be undertaken and this will require India to find cheap methods of storing power. Electric cars usage is picking up pace and electric charging stations are being planned and built, but again electricity generation has to completely move away from coal and India is heavily reliant on coal. For the increased use of renewable energy, India has to first invest in the technology and infrastructure needed to harness this energy, and it has to be the government which will have to lead from the front by reducing bottlenecks put up by largely public sector controlled discoms. Public sector protection is one of the key bottlenecks that need to be eliminated.

MS: The Arctic is warming almost three times faster than the rest of the planet. The recent highest temperatures were 38 degrees Celsius. The world is bearing the brunt. And India is already facing regular climatic disasters for the last 7 years. What immediate Environmental Policy changes does India need to take towards combating the wrath of ongoing climatic disasters in the country?

LB: The environment policy in India is something that has repeatedly been ignored by the policymakers of almost all the governments that have been at the helm. The governments in general have not paid much heed in formulating a robust environmental policy and efficiently implementing them. The ministers in charge either have negligible knowledge and interest in the domain or are simply not the fit in leading the charge. As things stand, we are already lagging behind in protecting our environment and any further delay in action will more or less take us to a point where there shall not be many choices and actions left to take. Even today, though India has made impressive strides on RE and EVs, it is planning hydropower plants, retaining coal power and even expanding them, planning to ‘develop’ Andaman, Lakshadweep and Nicobar Islands, building massive highways on the Himalayas; each of these will irreversibly damage the environment.

Not just India, but the entire planet has witnessed the massive surge in the occurrence of climate disasters. Climate change appears to increase existing pressures, for example in areas already suffering from water shortages. Glaciers are changing, ocean water levels are rising, corals dying, and extreme weather events such as storms and floods are becoming more frequent and severe.

While many developed countries are taking extensive measures to protect their environment and reduce ecological disasters, we have not really witnessed the same intensity in India. For starters, all designated forest land should be left untouched and not encroached upon by the public or private sector, for industry, cities, residential areas, agriculture or infrastructure. However, regular use of forest land for industrial and sometimes for leisure purposes is still being carried out, unabated in most cases. For water bodies, they should be left in their natural form and direction. Human activity on water bodies such as dam construction, agriculture, use of fertilisers, manures and pesticides, animal husbandry activities, inefficient irrigation practises, deforestation, aquaculture, pollution due to industrial effluents and domestic sewage, mining, and recreational activities, lead to colossal damage to the ecological system or nature.

While biodiversity parks are definitely needed and contribute to maintaining the ecological balance, making them on forest land is not a good idea. These parks should be brought up in areas where normal ecological parameters are falling or the land is already barren for any environmental activity. India has to fight the environmental battle on all fronts and not just stick to a subsection of the climate/environment ecosystem.

MS: A tsunami of biomedical waste from the health measures during the ongoing Covid-19 pandemic is degrading the environment further. What kind of measures will help the nation, the world to overcome this unintentional harm to the environment?

LB: Being humans, we shall always put ourselves and our survival before thinking about protecting our environment. Given the impact the COVID19 pandemic had on the world population in general and our fight to survive, not much thought was given on the harm our tools to fight are having on the environment. This biomedical waste generated from the health measures taken is just a by-product of the entire economic activity. The pace with which the pandemic engulfed the world, not much could have been done on measures to overcome the problem of biomedical waste. All that mattered was the will to survive at any costs. No doubt, the biomedical waste harms the environment, expecting the people to think about the environment over their lives cannot be fathomed. Waste disposal has always been neglected by policy makers, and biomedical waste is just one component of a much larger problem that includes plastic waste, lack of segregation, poor collection, lack of scientific waste management and disposal practises, sewage and effluent disposal etc. In Swachh Bharat we have a program that can take care of such issues, but if funds are not adequate to the task at hand, not much can be expected.

MS: Ecological Civilisation in India' amid the urban population slowly moving towards organic products. But is that enough?

LB: There are many such experiments, including those of circular cities and they are given different names by different people. While we can talk about them, they are small pilots that only show that things can work on a micro-scale. They will not work at the national level, for that to occur we need a combination of higher taxes and prices for environmentally damaging activities and products, publicised plans on how we are going to stop damaging activities such as coal power, single use plastics, clean up rivers and oceans, stop wasting money on inefficient electricity sector, switch from fertiliser, electricity and other subsidies to DBTs, plan cities differently, and yes decentralise and allocate greater accountability and responsibilities to city, village, and local governments.

MS: Your study in 2019 “Emerging Employment Patterns of 21st Century India” showcased that the rate of population growth has been almost twice the rate of growth in jobs. And with the on-going pandemic already pushing up the job loss scales, what kind of Comprehensive employment, industrial policies can ensure sufficient employment? And how can Indian's below the poverty line be up-skilled so as to earn enough for survival?

LB: Indeed, the problem of unemployment is getting worse in India, as the latest CMIE data has shown that the unemployment rate touched a 4-month high of 7.9% in December 2021. Both urban and rural unemployment numbers showed an increase last month. While most countries saw a rise in unemployment rate in 2020, India’s rate has exceeded most emerging economies.

In India, the problems of unemployment and poverty have always been major impediments to economic development. Regional disparity is also crucial in this context. Economic reforms, changes in the industrial policy and better utilisation of available resources are needed to reduce the problem of unemployment and poverty.

What is really needed is a long-term focus on employment policies rather than looking for short term numbers. The focus has to be concentrated on creating employment opportunities in rural areas as our paper showed that the stark difference between population growth rate and job growth rate was on account of the extremely low rural employment growth rate of 0.08%. This, coupled with a large segment below the poverty line residing in rural areas, exacerbates the problem of survival for many. This can be mainly attributed to falling employment in agriculture and low level of education among the rural poor. India’s move from a primarily farm economy to a booming services economy underscores the importance of education as India's growth has been powered by high-end services like software and finance manned by highly skilled workers. There have been few manufacturing or factory jobs that can absorb a large number of unskilled or low-skilled workers.

Briefly, industry will not be able to address India’s employment problem, and in fact we should not have a sectoral approach, be it rural-urban or industry-services. Simply put, we need to make sure that people get good basic education, health care, and a justice system that protects basic human rights of the poorest especially from the government (all of which we have failed in miserably), reduce the power of government agencies in creating hurdles for small businesses, reduce the damage that inspectors etc. do to small businesses be they street vendors or SMEs, ensure easy access to funds through a more vibrant financial ecosystem (with less public sector), more freedom and accountability to rural and urban governments and not to state and central level bureaucrats. In short, better education, health and justice by the government, and less government everywhere else. The people of India are more than capable of generating large surpluses for themselves as they have always done till colonialism entered and continues surreptitiously through government functionaries.

MS: As per recent media reports: 'Govt. to bring advisory on flex engines allowing 100% ethanol use as fuel'. How safe would this be in India considering our drastic heated up environs during the summers?

LB: With the research currently available on flex engines using ethanol as fuel, it appears that this could be a game changer on many fronts including being cleaner for the environment than the usual petrol engined. Given the size of the country’s sugarcane and grain production, India can meet most of its ethanol requirements indigenously. It will drastically cut the import bill; help boost the farming sector and generate lakhs of jobs.

Flex fuel engine benefits easily outweigh the problems associated with it, even if we only talk about the environmental aspect of it. Ethanol burns cleaner than gasoline, which means that flex fuel engines emit fewer toxic and greenhouse gases into the environment than the usual petrol engines, making them more environmentally friendly. Ethanol can be sustainably produced from sugarcane and corn which also makes it a good substitute for importing petroleum. A concern however exists with respect to ethanol production in India. While there is a surplus of sugarcane and corn in India, careful analysis needs to be done to ensure that production of these crops as fuel does not distract the country from actual food production, which is already a problem in some countries that use this mixture. As for safety, if it's not safe of course we will need to innovate to make them safe. We really don’t have that many options.

About Laveesh Bhandari

Laveesh Bhandari is an empirical economist, environment evangelist and entrepreneur. He studies, writes and comments extensively on inclusion and environment, and the role that government, society and private initiative can play in improving it. He has a rich published research output to his credit pertaining to sustainable livelihoods, industrial, economic and social reforms in India, economic geography and financial inclusion. Laveesh currently divides his time between Indicus Foundation and Centre for Social and Economic Progress, both based in New Delhi. He received his PhD in economics for which he was awarded the Best thesis in International Economics. He has taught economics in Boston University and IIT Delhi has been the managing editor of Journal of Emerging Market Finance. He has built and seeded and exited from three companies in the research, analytics and digital domain.

About the Interviewer

Mahima Sharma is an Independent Journalist based in Delhi NCR. She has been in the field of TV, Print & Online Journalism since 2005 and previously an additional three years in allied media. In her span of work she has been associated with CNN-News18, ANI - Asian News International (A collaboration with Reuters), Voice of India, Hindustan Times and various other top media brands of their times. In recent times, she has diversified her work as a Digital Media Marketing Consultant & Content Strategist as well. Mahima can be reached at

Disclaimer : The opinions expressed within this interview are the personal opinions of the interviewee. The facts and opinions appearing in the answers do not reflect the views of Indiastat or the interviewer. Indiastat does not hold any responsibility or liability for the same.

indiastat.comFebruary, 2022
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