Interview: In Conversation With The Man Behind The Indian Digital Payment Revolution, Dr. R. B. Barman (Part II)

This is Part II of a two-part series

Recently, KredX had an opportunity to chat with the man responsible for the introduction of digital payment services in India, Dr. R. B. Barman, who is also an advisor to KredX. Dr. Barman is the Chairman of the National Statistical Commission, Advisor to the National Payments Corporation of India (NPCI) and has also served as the Executive Director of RBI, among the various positions he has held during the span of his illustrious career.

KredX: The number of banks in India is negligible compared to other countries like the US. Has there been or is there any effort from RBI to look into this problem?

Dr. Barman: Yes, RBI has worked on this by giving licenses to businesses to set up banks in urban and rural areas. But you should realise that at the end of the day, this is a market and business generally aim for commercial success. They don’t focus on the country. Since I am a public servant, I talk about public welfare but a businessman will mainly focus on his business. To make this work, the Government has to develop wealth and market, and create an excellent infrastructure to aid all such efforts.

KredX: Was the Mahatma Gandhi National Rural Employment Guarantee Act or MGNREGA actually able to help with payments for farmers and the rural communities?

Dr. Barman: Overall, MGNREGA definitely has helped but unfortunately, MGNREGA couldn’t solve the problems of economic dynamics. However, one part of the problem was solved because farmers got funds, but productivity still remains an issue. We need to build capacity to sustain ourselves. Since we weren’t able to build that kind of capacity, we had to provide certain things as and when they were required.

We should use our human resources much more productively and purposively than MGNREGA. For that, we have to develop a market. Non-market is always relative as we have seen it and MGNREGA is non-market. We have to develop market and market infrastructure and institutions that strengthen our market.

Two-thirds of our country lives in rural areas and only 1/3rd lives in the urban areas. Now, we have been doing the priority sector lending for many years now.

But you can ask any rural person, what is the financial market value, the answer from 2/3rd of the people will be that we have not given them the financial credit.

KredX: What are your views on the financial inclusions?

Dr. Barman: Financial inclusions is basically for infusional growth which is important. So, financial inclusion should also be planned along with institution. They should be in sync. How do we make this in-sync? You need to have a vast information system and create big data to capture everything there. You need to be in a position to see what works and what are the financial terms.

KredX: What do you think about the recently launched Rashtriya e-Market Services.

Dr. Barman: Rashtriya e-Market is a very good thing provided people get to know about it and make use of it. I have always believed in people getting the right price and e-market process gives the right price. In this process, both consumer and producer benefit. Actually, Karnataka and Andhra Pradesh are doing really well in all sectors. They have realised the push that is needed from the Government to create the agricultural market and set up to overcome the problems of the middle people in this equation.

KredX: Bangalore has created NCDEX  which is an online commodity exchange platform. It’s a good platform but they clearly have crossed many hurdles to come to this stage. What are your thoughts on that?

Dr. Barman: I used to be associated with one such commodity market organisation and I’ve noticed that there are multiple levels of the commodity chain. This makes the entire process cumbersome and complex. While the Government is trying to build institutions to ease commodity exchange, what needs to be worked upon first is to remove such pain points. And it’s not just in some parts of the country, it is everywhere!

KredX: What is your grand vision of India 20 years from now?

Dr. Barman: I want India to grow by at least 10% (GDP). We have been working hard for growth and we should grow at least the double digit level in next 20 Years.  China did it soon as they have a different system, a commanding system altogether in a particular way. But we have a democratic system, to achieve the goal; we need to bring in more transparency.

The Government is basically a partnership between the society and the government. The Government needs to realise that they are not the bosses and the public is not at their mercy.

If you see the learning phase of a democratic country like the UK, it took them 300 years to learn pure democracy. Today we lack the right kind of education, right kind of thinking, and we need to understand what a citizen should ask for and what government should deliver.  And it should be available to everyone, that’s even more important.

The citizens of a country should know what the government is doing and where the money is being spent. Though on every budget we get to know this much money is being allocated for this particular sector, there is no accountability for the same. There should be accountancy in each level, let’s say if some “X” amount is allocated to a village panchayat, the people should know how much is allocated, how much it has been used for the development, how much is left,  etc.  Leakages should be plugged and the data should be maintained well.

Also, our judiciary should be fast enough; most of the cases which go to court with are dragged at least for 3 years which is too much time and is not fair to anyone. I strongly believe that “Justice delayed is justice denied”.

KredX: What do you think about KredX? Looking at the various sectors of our country with the insights and experience you have, how can we better ourselves where we help in the growth of the country?

Dr. Barman: It’s a good feeling to see KredX grow. After I was initially approached by Manish and Anurag, I was surprised when they explained the concept to me because if you really look at it, the business KredX does is only a small part of a balance sheet. I never imagined that they could create a big business out of this! But I’m glad they could find that opportunity and created a successful business out of it.

India as a country has a problem in economic growth today. Economics is all about growth, equity and allocative reference. These are the three fundamentals of economics.

Even after over 70 years of independence, we have more than 50% of people unemployed. National surveys show that 80% of the farmers want to quit farming as it is not giving them enough money for survival. Most people who are stuck in farming don’t know how to get out of it. But for any country, human resource is very important. We have to focus on human resource and try to find a way to get the work done. And how do we do that?

Firstly, we should make people productive because there is no point in just giving money as we will just be creating leaches. We should make them more productive and once the people are productive, the market should give people regular advice and make them more efficient.

As we discussed earlier, farmers get only 10-15% payments for all their produce in the wholesale market and rest of the money is taken by middlemen. The farmers get very little money in hand which leaves them with no money to invest money in creating assets. Did you know that productivity of agriculture in India is much lower than Bangladesh, China and France?

Now, the total productivity has decreased and we must understand that we lose opportunities with this process. To beat this problem, we need information system and big data to try and collect data on the yield part which directs them to get the output in addition to the land records we already have.

With the help of the data collected through data developmental analysis, they find out the best possible input-output combination and the particular level of distance (gap). With this information, we can collect more far more information.

Today, we are all at the national level or state level, where most of the things are used by economists for their research analysis or publishing. The credit doesn’t go to the person who produced the information as the people who produce the information do not have knowledge about the market or its structure and they lack institutional support. To help them out, they should be given right kind of advice. Now, we are in a position to address this problem with the help of micro-level data, which is because most of the land documents are already available or they can also collect data through surveys or some other ways such as satellite imagery which is again a statistical measure survey which helps us figure out the actual problems. Also, they need an institutional mechanism to address the issues. We need institutions to support such causes and once they find institutions, it is easy to address the issues. It then becomes easy to use a small part of the economy for initial consumption and the rest of it for industry and services. This process is called structural transformation. In this process other sectors create demand and they require demand creating technology or otherwise this technology won’t sustain. We need to create demanding technology to set the dynamic process of the economy and if this prospers, we move on to the business sector.

One has to understand money, money markets and how money works. In our country, there are many small petty shops mostly because these shop owners don’t find jobs in the first place. They don’t know how to expand themselves and thus, gett stuck at the lower levels of income.

Not all shops can be supported, but the ones that can be should be guided by KredX. KredX can closely monitor and help them eventually.