Strong banking sector

Though there are many such imbalances in the economy in general - the ones leading to our highest-ever food inflation are at the centre of everybody’s attention. There is one particular imbalance that deals quite directly with the central bank. The penetration of financial services for the poor and underserved areas of the country. There isn’t much to speak of. The Governor talked of taking the banking sector to new heights “building on the outstanding performance of the sector in a short span of 4-5 years.” That might indeed be true. Though there is much debate over the nature of the growth that was seen under the military regime, perhaps the banking and financial services sector did indeed grow in sheer scale over the past half-decade. With a democratic government at the helm of affairs, perhaps this scale could actually be converted into widening the net of the financial services markets to people who really need them. If credit provision were made easier to poorer farmers, it could even go a long way in helping out in our food inflation situation. And the reforms in credit provision could go a long way in helping out in the industrial sector as well. If the disparate growth of recent years has actually somehow led to an increase in the capacity of the banking and financial services sector, this is a time to counter all criticisms of the growth being in unproductive sectors.

While on the subject of the State Bank, what the federal government needs to work on is to stop borrowing too much from it. There is a Fiscal Responsibility Act that requires the government to curtail the fiscal deficit. It isn’t being paid much heed to.