Indian Muslims annually lose over Rs. 64,000 crores

By Syed Zahid Ahmad,

Political parties are busy in finalizing strategies to attract voters before general election. This time before manipulating schemes for Indian Muslims, politicians would certainly refer Sachar Committee report; but they also need to consider some other problems of Indian Muslims which has been ignored by Sachar Committee. Study shows that Indian Muslims don’t need any special schemes but fair policies to ensure inclusive growth of Indian economy. India cannot secure sustainable growth unless its second largest community is brought into mainstream, whereas the fact is that the second largest community of India is more worried about its security compared to growth. The plight of Muslims in world’s greatest secular democratic economy reflects from following facts-

1. Indian Muslims are so marginalized that its share in national population is 13.47%, but they actually share 18.35% of Indian population living below poverty line. It shows that instead of sharing development, Indian Muslims really share national poverty.
2. When 31% Muslims live below poverty line and 39.4% Muslim workers as self-employed in the unorganized sector, the huge credit loss to Indian Muslims due to regulatory hurdles is like economic assassination of Muslims by financial sector regulators.
3. In Muslim concentrated areas, the physical infrastructure lacks behind the actual requirements; and the community based institutions are constrained by regulations.
4. The schemes announced by government to empower Minorities are not linked to Muslim NGOs which could have effectively optimized the social resources of the community.
5. To understand Muslims problems regarding economy and finance, there is no Muslim officer in grievances cell at Department of Economic Affairs. In fact we hardly find muslim staff even in institutions like NMDFC which is supposed to focus on minorities.

Thanks to Dr. Manmohan Singh and his team for the Sachar Committee Report, but a lot more is desired for rescue of the Indian Muslims. The Sachar Committee Report has made recommendations about policies and schemes, and also well stated that the said objectives would only be achieved if both sort of recommendations are implemented simultaneously. The Governmnet has taken up some of the recommendations related to shcemes only.

Following are some questions related to the intention of UPA Government related to the study made by Sachar Committee–

1. Why Muslims status in capital market was not studied while net worth in capital market is more than all sort of deposits in all Schedlued Commercial Banks (SCBs)?
2. Why the committee did not suggested to link minority related shcemes to Muslim NGOs which would have not only reduced the cost of implementation but also ensured increased community participation in these schemes?
3. While the issue of Muslims low participation in IAS or other higher level jobs were well mentioned in the report, why the committee did not made any suggestion to improve Muslims participation in RBI, where Muslims are just 0.78%?
4. Why the committee did not pointed the figures reflecting net annual financial loss to Indian Muslims which is very huge and is hampering economic growth of Muslims.
5. Why there is no suggestions about optimizing Muslim’s social and financial resources?

Considering the economic plight of Indian Muslims the variuos schemes announced by central Governmnet are not sufficient because major thrust is upon education only whereas severe economic backwardness and financial exclusion need immediate attention. The shcolarhsip amounts could just be used to pay tuition fees; whereas for Muslims household living belw poverty whose expenses are met through daily earning of children, such schemes do not cover the opportunity cost. Lets see what Government offers to Indian Muslims under name of minorities schemes–

and institutions set for Minorities
Approx. Amount

(in Rs. Crores)

  1. Annual Grant to Ministry of
    Minority Affairs for 2008-9
  1. Asset of Maulana Azad Education
  1. Asset of National Minority
    Development Finance Corporation
  1. Annaul grant for Multi Sectoral
    Development of 90 Minority districts
  1. Modernization of Madrasas
  1. Scholarship schemes through
    Minsitry of Minority Affairs
  1. Central Wakf Council, NCPUL
    and other instititions / schemes
  1. Total approximate amount
    spend on welfare of Minorities

Source – Central Governmnet Annual Budget statement 2008, PIB bulletins and GoI websites

Note – Even this total amount was half before March 2008.

This total amount is not even 10% of the amount indian Muslims are annually loosing in terms of credit loss due to conflict between Islamic ethics and financial sector regulations. Due to interest based systems, since independence banking has been unfavourable sector for Indian Muslims. The Sachar Committee Report pointed that Muslims have 7.4% share in individual saving deposit amounts at SCBs in year 2005. But they had just 4.7% share in outstanding amounts under Priority Sector Advances (PSA). Considering the same ratios of deposits and credits for Muslims in all sort of aggregate deposits and credits at SCBs in 2008, Muslims would have following aggregate figures.

/ Credits Ratios and Amounts for SCBs
Aggregate Deposits with
all SCBs
Aggregate Deposits with SCBs made by Indian Muslims
Credit extended by all SCBs
Credits extended by SCBs to Indian Muslims
average Credit-Deposit Ratio at SCBs for all communities.
extendable amount of Credit by SCBs to Indian Muslims.
Credit-Deposit Ratio by SCBs to Indian Muslim.
Credit loss to Indian Muslim as % of their deposits.
amount of Annual Credit loss to Muslim Community.

Source: - Data derived by analysing the RBI Annual Report 2008 and Sachar Committee Report.

Considering the economic plight of Indian Muslims and their annual financial loss in terms of credit, it was expected that Governmnet should amend banking regulaton act to allow Muslims practicing Interest free banking. At least the government should have guided RBI to counter this financial loss to Muslim community, but instaed of framing desired credit policy for Muslims, the Prime Minsiter 15 point programme advcates opening more interest based banks in Muslim concentrated areas. Interesting to see how the Government stops this contineous credit loss to Indian Muslims, when Muslims are reluctant to deal with interest based banking activities and have been demanding for interest free banking.

Though the Raghuram Rajan Committee for Financial Sector Reforms has made following recommendation for interest free banking, still political will is required to accept and implement these recommendatuions –

“Another area that falls broadly in the ambit of financial infrastructure for inclusion is the provision of interest-free banking. Certain faiths prohibit the use of financial instruments that pay interest. The non-availability of interest-free banking products (where the return to the investor is tied to the bearing of risk, in accordance with the principles of that faith) results in some Indians, including those in the economically disadvantaged strata of society, not being able to access banking products and services due to reasons of faith. This non-availability also denies India access to substantial sources of savings from other countries in the region.

While interest-free banking is provided in a limited manner through NBFCs and cooperatives, the Committee recommends that measures be taken to permit the delivery of interest-free finance on a larger scale, including through the banking system. This is in consonance with the objectives of inclusion and growth through innovation. The Committee believes that it would be possible, through appropriate measures, to create a framework for such products without any adverse systemic risk impact.”

We hope that the so called secular political parties would not only raise political will to accept and implement the above recommendations submitted to the Prime Minsiter on 12th September 2008; but would also add following recommednation for overall economic welfare of Indian Muslims.

1. There should be at least one Muslim member in committees constituted for study and analysis of national level issues, because it is not justify ignoring second largest community of the nation while doing strategic study for the nation as a whole.
2. There should be priority based initiatives to implement the recommendations made by Raghuram Rajan Committee to allow Interest-free banking.
3. If any committee has no Muslim member, the committee should physically interact with Muslim NGOs or institutions to ensure inclusion of Muslims in that study, recommendations and schemes framed after that.
4. Minority related schemes should be linked to Muslim NGOs so that Muslim social resources could be optimally utilized otherwise the process of isolation may lead wastage of Muslim social resources or it may go against national interest as well.
5. RBI should find ways to increase Muslims working staff. It may need to incorporate Shariah compliant products in banking sector for Muslims.
6. There should be at least 12% Muslim working staff in special financial institutions like NMDFC, SIDBI and NABARD. Moreover such institutions should introduce interest free credit schemes for Muslims because interest is most important hurdle in financial inclusion of Indian Muslims.
7. To allow inflow of capital on profit loss sharing basis for our vulnerable enterprises associated with unorganized sector and farmers in agriculture sector, it is necessary that such investments should be exempted from all taxes and free from undue formalities.
8. Bilateral trades could be developed for agriculture and allied sector to promote FDI from Midlle East countries so that we could get interest free funds for agriculture sector and could also increase export of increased agricultural products after investments.

It would help India to attain sustainable inclusive growth and counter problem of Terrorism because if Indian Muslims are allowed to earn better livelihood, the most underpriveledged and most frastrated groups among Muslims may be utilized for growth orineted activities instaed of destructive objects. For national security and inclusive growth, it is very important that all human resources are engaged into constructive work and there must not be dissident group among minorities who may otherwise feel insecurity and could shake hands with our national enemies. So we hope political parties will now frame fair policies for Muslims instead of manipulating special schemes for Minorities.


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