Shaktikanta Das: Journey towards inclusive growth in India
Opening remarks by Mr Shaktikanta Das, Governor of the Reserve Bank of India, at the Third
Suresh Tendulkar Memorial Lecture by Mr Tharman Shanmugaratnam, Senior Minister, Republic
of Singapore, and Chairman of the Monetary Authority of Singapore, Mumbai, 7 January 2020.
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On behalf of the Reserve Bank of India, I am delighted to welcome Mr. Tharman
Shanmugaratnam to deliver the Professor Suresh Tendulkar Memorial Lecture, the third in the
series. We are also deeply honoured to have Smt. Sunetra Tendulkar, the wife of late Professor
Tendulkar and his daughter Smt. Saee Sapre with us. A hearty welcome to all the distinguished
invitees of the Reserve Bank.
About Prof. Suresh D. Tendulkar
2. Prof. Suresh D. Tendulkar was a great teacher, economist and policy analyst. His seminal
work on the measurement and analysis of living standards in the country will remain his
enduring legacy to public policy formulation. In fact, a defining feature of Prof. Tendulkar's life as
a professional economist was his deep sensitivity to poverty and a commitment to data-based
research to understand poverty.
3. With a formidable academic record of great distinction, he joined the Indian Statistical
Institute in 1968. This was followed by a prestigious two-year assignment at the Development
Research Centre of the World Bank. From 1978 onwards, he served with great distinction in
the Delhi School of Economics in different capacities until his retirement in 2004. He served on
numerous working groups on the design and conduct of the National Sample Surveys and was
the Chairman of the Governing Council of the National Sample Survey Organisation; Chairman
of the National Accounts Advisory Committee; and Chairman of the National Statistical
Commission. He was a member of the Lakdawala Committee for estimation of poverty in 1993,
which recommended state specific consumption baskets for estimation of poverty. He became
a member of the Prime Minister's Economic Advisory Council in 2004 and in 2008 he was
appointed the Chairman of the Council.
4. Prof. Tendulkar served as Director on the Central Board and the Chairman of the eastern
region Local Board of the Reserve Bank from 2006 till his sad demise on June 21, 2011. This
lecture series was instituted in his honour in 2013 in recognition of his contribution to the
economics profession and his association with the Reserve Bank.
About Mr. Tharman Shanmugaratnam
5. I am happy that Mr. Shanmugaratnam has agreed to come to the Reserve Bank, though after
a gap of 7 years, to deliver the Third Suresh Tendulkar Memorial Lecture. Earlier he had
delivered the 13th L.K. Jha Memorial Lecture in September, 2012. Mr. Shanmugaratnam is a
renowned economist and a political personality. He has spent his working life in public service,
in roles predominantly related to economic and social policies. Currently he is serving as Senior
Minister of Singapore and also Coordinating Minister for Social Policies, and advises the Prime
Minister of Singapore on economic policies. He is concurrently the Chairman of the Monetary
Authority of Singapore (MAS) and Deputy Chairman of Government of Singapore Investment
Corporation.
6. Mr. Shanmugaratnam started his career at the Monetary Authority of Singapore as its Chief
Economist. He later joined the Singapore Administrative Service and served in the Ministry of
Education as a Senior Deputy Secretary for Policy. Afterwards he started his political career in
2001 when he was elected as Member of Parliament in Jurong Group Representation
Constituency and has been re-elected three times since then. He had served in prominent
positions of Minister for Education, Minister for Finance and also Deputy Prime Minister,
following the 2011 general election.
7. Mr. Shanmugaratnam chairs the Group of Thirty, an independent global council of economic
and financial leaders. He also chaired the G20 Eminent Persons Group on Global Financial
Governance that recommended reforms for a more effective system of global development
finance and financial stability. He earlier led the International Monetary and Financial Committee
of the IMF. Currently, he is co-chairing the Advisory Board for the United Nations' 2019 Human
Development Report, and is serving on the World Economic Forum's Board of Trustees.
8. The theme of "Broad-based Prosperity: Tackling the Fundamentals", chosen by Mr.
Shanmugaratnam for today's lecture, is relevant globally and also for the Indian economy. The
importance of broad based prosperity has been well recognised for a long time and there is a
consensus on the need to ensure that the benefits of economic growth reach the populace at
large. As an idea and a policy objective, it is similar to the concept of inclusive growth. While
there is consensus on the need to achieve a more egalitarian social and economic order
globally as well as within a country, it is equally important to focus on the fundamentals and
create an eco system that facilitates greater inclusion. The underlying theme has to be
structural reforms.
9. In this context, let me mention that the mandate given to RBI on maintaining price stability,
financial stability and economic growth is not only important from macroeconomic perspective,
but also for the objective of inclusive growth. Persistently high inflation adversely impacts the
economy's allocative efficiency and impedes growth. It also contributes to a worsening of
income distribution by depreciating the real income of the poor. In the backdrop of very high
domestic inflation as compared to G20 countries, we adopted a flexible inflation targeting (FIT)
framework in 2016 under which primacy has been accorded to the objective of price stability,
while simultaneously focusing on growth when inflation is under control.
10. Similarly, high growth with financial stability augurs well for inclusive growth. High growth
can bring inclusiveness in the process of wealth creation and its spread effect. I need not
elaborate, but higher growth also improves tax-GDP ratio which enhances the resource
availability with Government to undertake social and infrastructure expenditure. Again, a sound
financial system with healthy banks and NBFCs can play an important role in meeting the credit
requirements of the bottom of the pyramid. Therefore, we have been focusing on strengthening
regulation and supervision to develop a robust framework of financial stability where the banks
and the NBFCs are able to fulfil the expectations of the society.
11. The Government and the Reserve Bank of India have also taken several micro-level
initiatives to achieve social and financial inclusion and to bridge income inequalities. Financial
inclusion in the Indian context is seen as part of a broader structural reform agenda. The Jan
Dhan Yojana to provide access to banking services has enhanced the opportunities and scope
for wider population to share the benefits of the growth process. Other schemes such as
PMKISAN, e-NAM, etc. have been launched with the objective of providing income support and
doubling of farmers' income.
12. In the area of agricultural market reforms, there is consensus that improvement in the
supply chain could become a major channel for promoting inclusive growth, as this can
increase the share of farmers in retail prices paid by the consumers. A survey conducted by
the RBI in 2018 covering farmers, traders and retailers in 85 mandis spread across 16 states
found that the difference between retail prices that consumers pay and mandi prices that
farmers receive (i.e., margins or mark-ups) varies across crops and centres. The average
share of farmers in retail prices of major primary food items varies between 28-78 per cent. It
is lower for perishables and higher for non-perishable items. Higher share of retail prices going
to farmers augurs well for the rural economy, which in turn, could help sustain domestic
demand. Initiatives towards wider rural roads network, better communication facilities for faster
exchange of information and easier access to micro credit will contribute to better price
realisation for the farmers. This ongoing process needs to be sustained alongside further
agricultural market reforms. Prioritizing food processing industries in the policy agenda,
encouraging direct sale of farm produce by farmers to consumers, strengthening e-NAM for
better price discovery and promoting storage facilities near producing centres will boost farm
income and rural employment opportunities.
13. The Reserve Bank of India has also taken various measures to increase the level of
penetration of banking services to unserved and underserved areas. Recently, the National
Strategy for Financial Inclusion (2019-24) prepared by the RBI has been approved by the
Financial Stability and Development Council (FSDC). It sets forth the vision and key objectives
of financial inclusion policies in India and aims to provide access to formal and affordable
financial services; broaden and deepen financial inclusion; and promote financial literacy and
consumer protection.
14. Other initiatives taken by the RBI include setting up of an Expert Committee and a Working
Group to examine the issues relating to credit flow to MSMEs and Agriculture sectors,
respectively. Through priority sector lending norms for commercial banks, we aim to support
farm and non-farm sector activities which are sources of livelihood for a large cross section of
population. We are now reviewing the priority sector lending norms, keeping in view the
changing needs of the economy and with a view to make them more inclusive. Other initiatives
like lead bank scheme, no frill accounts, banking correspondent and banking facilitator models,
technology products like mobile banking, financial literacy programmes, etc. have also
contributed to these efforts.
15. Leveraging latest technology for benefit of the people is also on the policy agenda of the
Reserve Bank. To fulfil the vision empowering every Indian with access to a bouquet of
epayment options that is safe, secure, convenient, quick and affordable, a focused effort has
been made to develop a state of the art national payments infrastructure and technology
platforms. Recently on December 16, 2019, we rolled out the 24x7x365 NEFT facility. With this,
India has joined an elite club of a handful of countries having payment systems that ensure
round the clock funds transfer and settlement on real time basis. For ease of settlement, RBI
has also enabled liquidity support facility on 24x7 basis to participating banks. We have
removed the charges levied for offering NEFT. Savings bank customers can now initiate online
NEFT transactions free of cost. Going forward, this can pave way for the large value Real Time
Gross Settlement (RTGS) system to be offered to the country on 24x7 basis. As of now, we
have extended the timing of Real Time Gross Settlement (RTGS).
16. To give impetus to small value digital payments, a new type of prepaid payment instrument
(PPI) with amount outstanding not exceeding Rs.10,000 has been introduced recently. To
increase customer confidence in electronic payment systems and ensure effective resolution
of digital payments complaints, a digital ombudsman scheme has been introduced. Recently
on January 1, 2020, the Reserve Bank has launched a mobile application called "Mobile Aided
Note Identifier (MANI)", for aiding visually impaired persons to identify the denomination of Indian
Banknotes.
17. With these words, I would now like to invite Mr. Tharman Shanmugaratnam to share his
thoughts on "Broad-based Prosperity: Tackling the Fundamentals". The floor would be open for
a brief Q&A session after the Lecture.