Though we ‘the People of India’ solemnly resolved ‘India to be a Sovereign Socialist Secular Democratic Republic and to secure to all its citizens Justice, social, economic and political liberty of thought, expression, belief, faith and practice, equality of status and of opportunity’, we have yet to realise that despite 63 years of independence, our monetary system is not socialist but continues to be Pro-Capitalist as designed by the capitalists during the British rule.
During the British rule, the Indian resources had been draining towards the British because capitalists of East India Company had made India a colony for the British. When the pro-capitalist British India reeked that the agitations for India’s freedom may increase in future and the British may need to quit India, they strategically incorporated a monetary system in the form of the Reserve Bank of India Act 1934, on March 6, 1934, to allow the capitalists keep on exploiting the Indian economy even after India’s independence. Thus RBI Act 1934 made Indian’s monetary system Pro-Capitalist through which the capitalists were empowered to lend and invest on interest basis.
Even though we got political freedom from the British in 1947, the capitalist forces kept on exploiting the Indian economy through pro-capitalist monetary system. After independence, the capitalists dominated lobby incorporated the Banking Regulation Act 1949 on March 10, 1947 even before enforcement of the Constitution of India. The strategy was that the capitalist could exploit the opportunities through accumulation of interest on monetary transactions; and the non-capitalists groups could not organise the financial resources in a socialist manner.
Since the Banking Regulation Act 1949 blocked scope for promotion of interest free banking in India, during the last 63 years the capitalist group kept on capitalising the opportunities whereas the socialist and cooperative movements suffered due to unfair financial regulations. This led to dominance of capitalism over socialism and we moved towards so-called liberal but pro-capitalist economic system. As a result the cooperative institutions hold just 12 per cent share in Indian credit market.
Due to unfair financial regulation for the capitalist and socialist groups, co-operatives failed to succeed at the rate private banks and public companies are being liquidated. Capitalists always got an edge in the banking and financial sector; thus kept on capitalising the resources whereas the socialists were not allowed to organise the interest free banking and financial system. This increased economic disparities in India. The common Indian became poorer and Capitalists turned into Corporate and Multinational Companies. They are now in a position to govern Indian economy. The interest factor killed the spirit of cooperation among socialist groups in India; so cooperatives continued to deteriorate.
This trend will continue till we understand the concept of economic wisdom. Though in the recent past the East India Company was bought by an Indian, considerably that Indian is also a capitalist. In short, we never thought about freeing India from capitalism. Historically, India was conquered when it was known as a Golden Bird, and presently capitalists keep on exploiting India through pro-capitalist financial regulations. Today if the capitalists seek to make a country a colony, they don’t need to conquer that nation, the liberalised pro-capitalists financial regulations are sufficient for it.
The capitalists had biggest threat from Islamic Economics because they had the fear in mind that if India adopts democratic political system of Islam, after understanding the potentials of Islamic welfare economics, India can also adopt the Islamic monetary and financial system which may end the road for capitalists in India. They knew that Islamic system is more socialist and discards economic supremacy of capitalists. Thus after independence, Indian monetary regulators not only approved to continue the British made Reserve Bank of India Act 1934, but also enacted the Banking Regulation Act 1949 in line of Capitalist policies. This kept ‘interest’ as the prime factor to regulate the monetary system, and disallowed interest free banking which could have otherwise opened a way for socialist pattern of banking and finance in India.
Since economic growth is not possible without banking services, we need to ensure financial inclusion of poorer and more backward sections of our society. The motive behind financial inclusion mission by the capitalist group is to find new markets for earning interest over idle capitals. After observing saturating financial sector growth in developed economies, the capitalists managed banks and financial institutions found huge potential to earn higher interest through financial inclusion mission. This emerging market to earn better rate of interest by way of appeal for financial inclusion has convinced the governments as well who otherwise failed to provide banking services for the poor.
Does the financial inclusion mission or working of micro finance institutions serve the purpose of inclusive growth? Had this been done, the credit deposit ratio for poor Indian Muslims might have increased and their proportionate share in Gross Domestic Income would have increased. But we just find conflict of interest in this business of financial inclusion. The Capitalists want to earn higher interest, the Micro Finance Institutions want major shares in Micro Finance businesses whereas the poor farmers, artisans, labourers and petty traders seek alternative mode of affordable credits. No player in this business of Micro Finance wishes to ensure inclusive growth. There is still no report to prove the micro finance business as positive for inclusive growth.
Growth should not be measured in terms of credit income ratio, but as effectiveness of Micro Finance to bring positive change in proportionate share of the poor in national income during different periods. Has the share of poor workers associated to rural economy increased with growth of micro finance business in India? The answer will open mind of those who seek to evaluate effectiveness of micro finance for inclusive growth.
The Ministry of Finance should evaluate the effectiveness of our banking regulations and credit policies in financial inclusion and inclusive growth. How we could empower the cooperative based interest free banks in India should be worked out. India needs to test at least a pilot interest free cooperative bank to empower the poor and vulnerable through principles of mutual cooperation. Only after that we may find alternative to pro-capital monetary system. The poor should be allowed to organise and utilise their financial resources through cooperative interest free banking. Is the Reserve Bank of India ready to experiment it, or does it fear that it may saturate scope of interest based banking which is the backbone of capitalist growth in India?