In the first article of Crisis Management, discussing the solutions “Adopt a Village” was an idea shared. This thought is not just for doing social service but also to improve the financial conditions of those villagers, establishing small scale industries, creating employment opportunities, overall to contribute to the country’s GDP.

In an article of EPW written by Prof. Arun Kumar points out an important issue that is “World over, production is carried out in large- and small-scale industrial units. In India, there is also the medium and cottage industry, or the unorganised sector. The large and medium industrial sectors by definition have a lot of capital and machines while the rest have minimal resources. A working capital is needed to buy raw materials and inputs, and to pay workers their salaries. At the start of a business, to buy machinery and to construct factory buildings, among others, loans are taken from banks. The smaller units get loans from private lenders, or have to invest their own savings. In a nutshell, businesses work with a lot of debt on which they pay interest. An interest is paid out of revenue generated from sales. So, if sales stop, repayment of loan or payment of interest becomes difficult, and businesses begin to fail. Such loans from the banks turn into non-performing assets (NPAs). However, if production continues when sales have stopped, more inputs are needed and more unsold products accumulate, so more working capital is required and more interest has to be paid. As a result, losses increase, and companies stop production in a lockdown.

What we are witnessing now e days many business have been closed, industries not in a position to pay interest to banks, center not in a position to give the their due share of GST as promised to States and entire financial system is on ventilator due to corona as its immunity is low amid pandemic. Even though the war room was set up on 19th March 2020, as a part of a business contingency plan (BCP). The BCP is the first of its kind implemented by any central bank in the world and also in our history because even during World War II we do not have any such facility, said an official of RBI, according to media reports. Why aren’t the experts of war room and officials of RBI not thinking of the idea of Interest Free Banking suggested by former governor of RBI Raghuram Rajan, in this hour of Crisis when GDP decline is 23.9% in its first quarter of 2020-21 and experts are expecting it will affect more in future.

P.Ghose wrote an interesting article in 2017 on Interest free banking which is extracted from Islamic finance System in DailyO. The proposal of Interest free banking was dropped by RBI which was pushed by Raghuram Rajan, which has many benefits in itself not only to one section of population to many other individuals, companies and government too. She explained Islamic banking and economy with examples how this model has great impact in non-Islamic and developed countries as, “Not all banking activities are accepted by the Islamic law. Sharia, the Islamic law, doesn’t allow a Muslim to engage in interest-based banking system, the basic principle of non-Islamic models of banking. So, a Sharia-compliant bank invests the money in only Sharia-accepted projects and then shares the profit or the loss with the account holders, without any interest rate. The account holders have to pay a minimum fee.

According to a report of the International Monetary Fund, Islamic finance assets grew at a double digit growth rate in the past decade from about $200 US billion in 2003 to $1.8 trillion at the end of 2013. And, the growth is not only confined within the Muslim countries. China, Germany, the UK and the US are some of the non-Muslim countries with Islamic banking system in place.

Looking into the present economic crisis in our country, we need to re-think on the banking system, and work out on alternative ways to boost the economy and show the way to the world, as we have huge human resource and administrative skills. Mr. H. Abdul Raqeeb, General Secretary of Indian Center for Islamic Finance, who is working since 2 decades to introduce Interest Free Banking concept in India, he presented the idea to former governor, deputy governor of RBI and deputy chairman of planning commission to introduce the concept. He also proposed the banking regulation (amendment) bill to be introduced in Parliament as a private member bill and also presented the idea for interest free windows in conventional banks. Post 2014, the idea of Interest free banking was dropped.

Therefore the about-turn of RBI, without offering a substantial and financially sound logic to dropping the proposal that would have brought in billions of dollars’ worth investment and remittance into the mainstream, significantly boosting India’s ailing economy, is a plain and simple political decision. Giving a green signal to allowing Islamic banking at an official and national scale, letting major public and private banks to open interest-free, Sharia-compliant banking windows in addition to existing services, would fly in the face of the Modi government’s perceived anti-minority stance, concludes P. Ghose.

Now, it’s not the time for politics of hate and we are at a juncture and waiting for the guide to show the path. Even though we are following federal structure in some departments, the capitalist nature of industrialists is making the poor, a poorer. Most of the products in the market are from single brand, that product will be available in all shops across the nation. The cost of transportation, marketing to sell it, GST which is another burden on the consumers. To avoid all these, we must promote the local business and small scale industries as the PM of India also backs “Vocal for Local”.

In an idea of “Adopt a Village”, consider the area of 500 families, their basic requirements can be manufactured within their reach, these families will be their consumers, once you have the customer base, and then the sale of product is obvious. It also creates employment for local youths, establish a self-help group system and plans for a startup. Either the manufacturing of soap, chilly power, atta packets, bakery items, etc can be done with low investment following all legalities. Large numbers of youths who are educated yet unemployed should join hands and create awareness in their localities, can be an entrepreneur today but an industrialist in future. It reduces the cost of agents, dealers in between, transportation, marketing, etc. Today’s youth who are the future of the nation, losing hope from the government and its policies must come forward to play their role to develop the nation and contribute to the economy.

Syed Azharuddin

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