Indian Financial System: The Unorganized Sector, Integration is the key
Article Details
Pub. Date
:
December, 2001
Product Name
:
The Analyst
Product Type
:
Financial Services
Product Code
:
ANIN90112
Author Name
:
Prof. R Vaidyanathan
Availability
:
YES
Subject/Domain
:
Finance
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:
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Description
Integrating the unorganized financial sector into the main stream would go a long way in facing the economic downturn effectively.India presents a fascinating variety and diversity in all aspects of its national life including national economy. Since the Indian society is mainly organized around families and communities the social capital in India is strong and deep. For instance it is the family in India, not so much the State, which provides for social security for the old age people and in that sense India is the most privatized economy in the whole world and this is what has lent stability to the nation for centuries.
This structure of organization in India has resulted in traditional methods of savings and investments and the purpose of such savings was and continues to be largely filial than personal. India has also evolved her own systems of channalising the savings to cater to the diverse needs of credit needs germane to her society. There is an assumption that traditional method of institutions and practices are not compatible with modern concepts and methods and therefore inefficient. This way of looking at things had disastrous effect on the financial system since traditional financial systems both corporate and non-corporate, effectively cater to the needs of trades commerce and industry in a significant fashion, evolved as they are by Indian genius to suit its society.
They are also some of the major sources of financing based on cash flow estimation rather than exclusively on security of assets. The related paper work is minimal and trust based on feel for the market acquired by functioning therein for long years, is one of the major aspects of the financial intermediation. Hence, it is imperative that the traditional institutions and instruments are encouraged and integrated into an evolving national system rather than replaced by the so-called modern institutions.
