the reach of rural banking, seem to be less than expected. perhaps it is time we ask ourselves some questions. first have our strategies, in terms of institutions and strategic directions, been flawed all along? have we run out of ideas in this regard? is our thinking on rural credit has fallen behind the emerging realities in the economy? is there a need for distinguishing between the cause and the effect as also between the symptom and the disease? is it lack of credit availability or want of commercial viability of agriculture that is constraining the credit - flow, or is it a complex combination of both? while we may not be able to answer many of these questions satisfactorily, i submit that we need to keep asking these right questions. new policy directions answers to some of the complex questions relating rural credit may be found in the most recent policy directions. the national development council approved a week ago " an approach to the 11th five year plan " which contains extensive references to the future policy directions. some extracts from the document may be in order. on objectives and challenges " one of the major challenges of the 11th plan will be to reverse the deceleration in agricultural growth from 3. 2 % observed between 1980 and 1996 - 97 to a trend average of around 2. 0 % subsequently ". " to reverse this tend, corrective policies must not only focus on the small and marginal farmers who continue to deserve special attention, but also on middle and large farmers who suffer from productivity stagnation arising from a variety of constraints ". " a second green revolution is urgently needed to raise the growth rate of agricultural gdp to around 4 % ". on financing development " the 11th plan must ensure that our policies are sufficiently flexible to support the development of micro finance. interest rates in the micro finance sector have to be significantly higher than in the banking sector reflecting the much higher cost of doing business. it is important to remember that most micro - finance institutions charge rates which are much lower than rates charged by money lenders ". on agriculture sector policy " the failure of the organised credit system in extending credit has led to excessive dependence on informal sources usually at exorbitant interest rates. this is at the root of farmer distress reflected in excessive indebtedness ". " there is evidence that farm debt is increasing much faster than farm incomes and the larger issue of the overhanging debt stock, as distinct from credit flow, has not even been on the agenda except of a

poor man get a good job if he has not benefited from good healthcare and education in the first place? in this modern world where good skills are critical to a good job, the unskilled have little recourse but to take a poorly - paying job or to look for the patronage that will get them a good job. so do we not arrive at a contradiction : the good delivery of public services is essential to escape the dependence on bad public services? money liberates and empowers... we need to go back to the drawing board. there is a way out of this contradiction, developing the idea that money liberates. could we not give poor households cash instead of promising them public services? a poor household with cash can patronize whomsoever it wants, and not just the monopolistic government provider. because the poor can pay for their medicines or their food, they will command respect from the private provider. not only will a corrupt fair price shop owner not be able to divert the grain he gets since he has to sell at market price, but because he has to compete with the shop across the street, he cannot afford to be surly or lazy. the government can add to the effects of empowering the poor by instilling a genuine cost to being uncompetitive – by shutting down parts of the public delivery systems that do not generate enough custom. much of what we need to do is already possible. the government intends to announce a scheme for full financial inclusion on independence day. it includes identifying the poor, creating unique biometric identifiers for them, opening linked bank accounts, and making government transfers into those accounts. when fully rolled out, i believe it will give the poor the choice and respect as well as the services they had to beg for in the past. it can break a link between poor public service, patronage, and corruption that is growing more worrisome over time. undoubtedly, cash transfers will not resolve every problem, nor are they uncontroversial. a constant refrain from paternalistic social workers is that the poor will simply drink away any transfers. in fact, studies by ngos like sewa indicate this is not true. moreover, one could experiment with sending transfers to women, who may be better spenders. some argue that attaching conditions to cash transfers – for example, they will be made provided the bis central bankers ’ speeches recipient ’ s children attend school regularly – may improve the usage of the