urbanization. with higher productivity, more food could also have been produced by fewer people and hence more people would have been released off the land. the second issue relates to the atypically low growth in manufacturing employment : during the decades of the 1980s and 1990s, output growth in industry far exceeded that in employment. this experience is also quite different from that of the east and south - east asian countries. thus, there have been neither demand pressures for labour in urban areas, nor supply of excess labour from rural areas. both are related to failures in both public policy and public administration and public management. just as we have not responded to the changing contours of agriculture, the low absorption of labour in urban areas is related to inappropriate industrial and urban policies. the persistence of industrial policies, such as restrictions in many labour using manufacturing sectors being reserved for small scale industries, and rigidities in labour legislations, have contributed to the bias against labour using industrialization. such policies were further compounded by inappropriate industrial location policies that have restricted location of industries in cities and urban areas since the 1970s. such restrictions have led to the loss of agglomeration economies, thereby raising the cost of industrialization and hence inhibiting expansion. moreover, the role of cities as incubators for manufacturing entrepreneurship was not also allowed to flourish ; and finally it is labour using industries that need to be located in cities and urban areas. the necessity to locate in distant locations, where labour is not easily available, also inhibited labour using industrialization, and hence urbanization. another set of reasons why urban growth slowed in the 1980s and 1990s is connected with the extant rigidities in urban land policy. the existence of rent control laws since the 1940s, urban land ceiling laws since the 1970s, inappropriate zoning and building bye - laws, have all contributed to the inflexibility in transformation of land use in urban areas, thereby slowing urban growth. these rigidities also implied excessive government control of urban land development, which was handicapped further by lack of resources and expertise. thus land assembly and land development in indian cities has been handicapped generally and has also led to excessive increase in urban land prices, making shelter unaffordable for a large proportion of the people. these policy rigidities have been further compounded by inadequate urban infrastructure investment and severe problems in urban governance : urban local bodies have not been effective ; they suffer both from lack of expertise and of financial resources. local taxes are typically not buoyant and poorly

k c chakrabarty : gennext banking – issues and perspectives address by dr k c chakrabarty, deputy governor of the reserve bank of india, at the panel discussion on gennext banking at the 4th international finance and banking conference, organised by the indian merchant ’ s chamber, mumbai, 25 november 2009. the assistance provided by dr deba prasad rath and mr tarun k singh in preparation of the address is gratefully acknowledged. * * * introduction at the outset, let me thank the indian merchant ’ s chamber for inviting me to chair this session on gennext banking of the 4th international banking and finance conference 2009. i congratulate the organizers on having chosen such topical and germane topics as “ banking – crisis and beyond ”, “ credit instruments – beyond vanilla lending ” for the earlier sessions. i particularly congratulate the organizers for selecting the topic “ gennext banking ” for this session, which is both timely and contextual, and merits serious deliberation. as you all may be aware, india is in the midst of a demographic transition. the demographic transition that india is going through will result in addition of millions of youth, who are potentially a bankable population and present a unique opportunity for banking system to expand their customer base. it has been estimated that the population in the 15 – 24 age group grew from around 175 million in 1995 to 190 million in 2000 and 210 million in 2005, increasing by an average of 3. 1 million a year between 1995 and 2000 and 5 million between 2000 and 2005. in 2020, the average indian will be only 29 years old, compared with 37 in china and the us, 45 in west europe and 48 in japan. in addition to the demographic transition, other drivers of gennext banking are inadequate penetration, gdp growth and availability of information and communication technology. the issue is how the banking system will gear up and tune itself with this new generation across the length and breadth of the country. as india is poised to be a global power in the 21st century, gennext banks will be a catalytic agent in making india a global power. the gennext society / economy will essentially be a knowledge society / economy and the challenge is to see how we can facilitate banking in a knowledge economy. there are also going to be challenges of dealing with knowledge workers. in the above perspective, i organize the rest of my presentation under the following sections. first, in section 1, i propose to