For Gujarat that boasts of a large entrepreneurial class, this is surprising to know that the state makes little use of the banking system. According to the 2011 census, only 57.9% of the households in Gujarat access banking services. This is lower than the national average of 58.7%, says banking statistics sourced from the Reserve Bank of India (RBI).
The per capita outstanding bank credit in Gujarat is lower than the all-India average. Delhi and Maharashtra top the states in terms of per capita bank credit, writes Mahesh Vyas, MD and chief economist, Centre at Monitoring Indian Economy.
Quoting the data sourced, Vyas writes per capita bank credit in Gujarat, at Rs. 31,935 in 2010-11, was lower than the all-India average of Rs. 33,667. It was nearly one-tenth of Delhi's Rs. 3,06,141 and nearly one-third of Maharashtra's Rs. 96,974.
Even Tamil Nadu and Punjab, with over Rs. 50,000, and Haryana and Karnataka, with over Rs. 40,000 of per capita bank credit, were way ahead of Gujarat.
The detailed break-up of bank credit shows that Gujarat manages a better-than average performance only in terms of industrial bank credit. Even in this case, Gujarat is not the leader - it is merely above the average. It ranks fifth after Delhi, Maharashtra, Punjab and Tamil Nadu. The per capita outstanding industrial credit in the latter two is over 30% higher than Gujarat's. Maharashta's per capita outstanding industrial credit is 2.4 times higher and Delhi's is 7.7 times higher than Gujarat's, the article says.
Gujarat does not lead in terms of industrial credit in any specific industry either. It does not lead in chemicals or petroleum or even gems and jewellery. Although Gujarat has the largest petroleum refinery and the largest total refining capacity in the country and although these are capital intensive, they do not borrow from commercial banks.
The case of gems and jewellery is particularly striking. The total outstanding bank credit to the gems and jewellery sector in Gujarat was Rs. 7,422 million as of March 2011. At the same time, the outstanding credit for the same industry in Andhra Pradesh was Rs. 11,350 million. In Karnataka, it was Rs. 27,149 million, in Tamil Nadu it was Rs. 18,797 million, in West Bengal it was Rs. 12,146 million and even in Punjab it was higher than Gujarat at Rs. 9,786 million.
The poor credit offtake by industries in Gujarat raises questions regarding the existence of a large entrepreneurial class in the state, or at least their sources of funds. There are greater reasons to doubt the existence of the famed entrepreneurial class or their sources of funds, Vyas says in his article.
According to the RBI, outstanding industrial credit in Gujarat was Rs. 1,055 billion as of March 2011. And, according to the Annual Survey of Industries, the factory sector of Gujarat had an outstanding borrowing of a similar value, Rs. 1,098 billion.
The total outstanding industrial borrowing by small scale industries from banks is roughly twice the size of the largely informal sources of funds of factories. And, in the same simple words, in Gujarat, the small-scale sector's borrowing from banks is low compared to the size of the largely informal sources of funds of the factory sector.
Personal loans in Gujarat average at Rs. 4,886 per person against a national average of Rs. 5,536. Delhi, Kerala, Maharashtra, Tamil Nadu and Karnataka have a bank borrowing of over Rs. 20,000 per person.
Loans for purchase of consumer durables in Gujarat is abysmally low at Rs. 16 per person, while the national average is Rs. 54 per person. In this respect, Gujarat is better than only Chhattisgarh and Bihar.
Gujarat's performance in terms of bank deposits per person is lower than the all-India average. At Rs. 50,147 it ranked tenth (out of the 21 larger states) compared to an all-India average of Rs. 50,210. Delhi, Maharashtra, Karnataka, Punjab and Kerala are the top five states (in that order) in terms of bank deposits per person.
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