Syllabus Connect :- General Studies -Paper II (Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment)
Mains Connect:-
- Discuss the status of financial inclusion of Indian Women and the suggest measures to improve it in light of Denarau Action Plan.
Over the past year, the Covid-19 pandemic has thrown existing inequalities into sharp focus. While the nation’s attention has been drawn to the plight of migrant workers and farmers, the worsening gender gap has not received similar attention.
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Analysis of the Centre for Monitoring Indian Economy’s Consumer Pyramids Household Survey data by researchers at Azim Premji University showed that women were seven times more likely to lose their jobs during last year’s lockdown, and 11 times more likely to not return to work.
An ongoing survey on micro, small and medium enterprises by Global Alliance for Mass Entrepreneurship and LEAD at Krea University shows that women-owned small businesses were hit more badly by the pandemic; 43% of women-owned enterprises surveyed reported monthly profit less than ₹10,000, compared to just 16% of units owned by men.
India’s government was quick to announce and transfer ₹500 per month for three months of lockdown last year to women through their Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. This seamless transfer of money was made possible by the Centre’s direct benefit transfer-PMJDY linkage, but more importantly, this could happen because the government knew which accounts were held by women.
Unfortunately, the lack of gender-disaggregated data in the banking sector overall meant that only PMJDY account holders received the benefit, and many other deserving women were left out. According to estimates by the Yale Economic Growth Center, more than half of India’s women poor missed the cash transfers.
Even though 55% of PMJDY accounts are owned by women, making for 232.1 million accounts, the problem goes two ways—not all poor women have PMJDY accounts and not all PMJDY accounts belong to the poor. The Financial Inclusion Insight survey from 2017 used by the Yale study showed that while 78% of poor women respondents reported having a bank account, just 23% reported owning a PMJDY account.
In the absence of official numbers, we depend on surveys to get a sense of the trends and extent of the challenge. Global Findex 2017 showed an immense improvement on inclusion with the PMJDY. The percentage of women in India who reported owning a bank account, or an account at any other financial institution, rose from 26% in 2011 to 43% in 2014, and to 77% in 2017.
The gender gap in terms of account ownership effectively reduced from 20 percentage points in 2014 to just 6 percentage points in 2017. But the gender gap in the usage of these accounts stayed high at 11 percentage points.
While economic data is usually spliced by states, geographies (urban-rural) or sectors, the gender angle stays out of the common discourse. So though we all know that women employees and entrepreneurs traditionally face more challenges than men, the extent of disparity remains in the shadows. The case for gender-disaggregated data in banking and financial sectors is a first step towards closing the gender-gap in India.
As a member of the Alliance for Financial Inclusion, India had pledged to close the gender gap in financial inclusion by implementing the Denarau Action Plan adopted in Fiji at the April 2016 Global Policy Forum. To redeem that pledge, we must first generate gender-wise data. The country’s regional and social heterogeneity makes it crucial that this data be granular. The Reserve Bank of India (RBI) and Department of Financial Services (DFS) need to get this implemented.
Second, apart from gender-specific data, there is another important initiative that the DFS and RBI should commit themselves to. That is the appointment of more women as business correspondents (BCs) by banks. The pay-offs will be manifold for economic and social progress in the country.
One of the greatest challenges in increasing access to and usage of financial services by women is the time and cost expended on reaching a bank outlet. Although it is gratifying that a forthcoming working paper, The Fintech Gender Gap from the Bank for International Settlements, finds that Indian women are as likely to use fintech as Indian men, there are bound to be wide regional and rural- versus-urban disparities in this finding.
That is another case for granular data. In states like Uttar Pradesh, Bihar, Rajasthan, etc., where the mobility of women is severely restricted, the situation is likely more serious. Women, in rural areas especially, are reluctant to visit bank branches, where they are often dealt with summarily by male staff.
Understandably then, they are more comfortable if bank agents meet them at their own homes. If these agents are women, the trust factor is magnified. However, women agents form less than 10% of the total agent network. So far, the focus has been on using women in self help groups (SHGs) as ‘bank sakhis’.
This initiative has worked well where SHGs are already in place. However, measures to recruit and train women BCs would help widen the spread of banking, enable the financial independence of women, help them plan their family finances, and facilitate women entrepreneurship, both directly, through credit, and indirectly, with BCs acting as role models.
Denarau Action Plan:-
Did you know that more than one billion women are still excluded from formal financial services?
According to the 2017 Global Findex, close to one billion women are still excluded from the financial system, and there is a 9% gender gap in account ownership’s across developing economies. This gender gap has remained unchanged since 2011, despite overall progress towards financial inclusion.
The Denarau Action Plan identifies measures AFI (Alliance for financial Inclusion) members can take to increase the number of women with access to quality and affordable financial services globally and close the financial inclusion gender gap, noting that the goals of financial access, usage and quality should be pursued in parallel and in a responsible and sustainable manner.
RBI of India is a member.
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.