Listening to the Customer is Key to Expanding Inclusion

Financial Inclusion News and Analysis Curated Monthly by Sumita Kale

As the second wave of the pandemic died down in India, the economy began a patchy recovery – Markit PMI for Manufacturing soared sharply in July into expansion zone, from the contraction seen in June, while the PMI for Services continued to show contraction for the third consecutive month. The GST collection moved back up above the Rs. one trillion marks, after the blip in June, while e-way bill generation in July came in at 6.42 crore, the highest in four months. CMIE reported the unemployment rate falling further in July from the peak in May. The Nomura Business Resumption Index has shot up to 99.4, just a tad short of pre-pandemic levels.

The worst appears to be over, for now. The RBI retained its 9.5% growth estimate for this year, flagging downside risks from vulnerability to further waves of the pandemic, high global commodity prices, and financial market volatility.

With the pandemic, government welfare payouts increased significantly crossing Rs. 5.5 trillion last year. The Prime Minister launched a new digital payment solution - the e-RUPI. This is slated to be a digital voucher which can be redeemed at specified merchants, without a card, digital app, or internet banking access. While the current initiative is aimed at accessing healthcare at specific centers, the solution is expected to expand to other services over time.

Direct Benefit Transfers have a vital role in smoothening income and consumption flows for poor households and India stands out as a global leader in the systems set up for transparency and efficient delivery. However, in a country as vast as ours, glitches do persist and  V Anantha Nageswaran and Sumita Kale have listed some critical measures, including grievance redressal, that are needed to improve on the system’s efficacy. A CGD and MicroSave policy paper looks at the implementation of the Pradhan Mantri Garib Kalyan Yojana during the lockdown last year and highlights the importance of beneficiary-centricity in the delivery.

Indians have increasingly turned to digital payments and transactions on the UPI platform crossed 3000 million in volume and Rs. 6 lakh crore in value in July 2021. With innovative fintech models, digital lending has also picked up and CGAP has a note out reporting results from surveys in three countries including India last year. While we still await the recommendations from the RBI Working Group on Digital Lending, it is important to keep the spotlight on the urgent need for an effective consumer grievance redressal mechanism.

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