Socio Economic Innovations In The Globalizing Economy
Published by MBA Skool Team, Published on August 07, 2012
Today, the world has become interconnected, right from east to west and, the web is so closely knit that the actions of people in the western part of the world affect the people in the eastern part of the world and vice versa. The systems have become so intertwined that culturally and economically every nation in the world is closely knitted with one another. The web is a result of a factor named “Globalization”.
I would focus my efforts on the socio-economic innovations in our country, India, which is in dire need of socio-economic innovations as majority of our population, 72% (Source: Wikipedia) resides in the rural heartland and, the benefits of globalization and growth have not percolated to these people living at the bottom of the pyramid.
The income disparity is at alarming levels between the rich and the poor. Our country, with its limited resources needs innovations that benefit the lower rungs of our society. The low income groups in the rural and urban areas and the middle income groups need services that require social innovation to provide economic sense.
Let us focus on few mechanisms and institutions that aim at bringing socio-economic revolution in our country and make the growth process inclusive.
1. Micro-Finance Institutions:
Due to unavailability of credit to the people living in rural areas by the banks or to the people who cannot claim credit worthiness, such people become dependent on private lenders which charge huge interest rates and fleece them.
The micro-finance institutions were created with an aim to provide financial inclusion to the lower income groups in our country and, the mechanism was created in such a manner that the lenders were organized into groups in the community and the loans were disbursed to women members in the family (as women are considered less prone to default). So, even if one tries to default, the other people in the group doesn’t allow default on the payments by a member.
The creation of such an institution provided much needed credit to the people and made them financially independent. This is a classic case of socio-economic innovation that spurred financial inclusion and source of sustainability to the people in the country.
2. Mobile Banking:
Today the mobile penetration/density in India is at 74.14% (as of July’2011, Source: “Economic Times”), where the rural penetration is significantly growing and thus, it has provided mobility to people living in remote areas. This has resulted in people having a mobile device but bereft of an identity. So, mobile services can be used as a source to provide financial services not only to the lower income groups but also to middle income groups.
As banks consider the expansion in rural areas to be unviable, the mobile devices (in liaison with service providers) can be used to provide a host of banking services to the poor. It can be also be used for retail transactions by the people.
Since, Mobile penetration is growing at a faster pace, it can be used in an innovate manner to provide socio-economic benefits to the lower income groups in the rural heartland and urban areas.
3. Unique Identification (Aadhaar):
With people in the country facing difficulties in expressing their identity and accessing the benefits meant for them, UID is a path breaking initiative by the government to provide financial inclusion, subsidies and delivery of services to the poor.
This will ensure that every citizen in the country is provided with a unique number which will identify the person uniquely and, the rigid registration process ensures that there is no duplication.
UID, without an iota of doubt will change the canvas of the country not in only in terms of socio-economic benefits but also the security apparatus. With UID, poor people would be identified correctly and the benefits of growth will percolate to the relevant section of the society.
Also, it will aid in streamlining other services like issuance of Passport, PAN card, opening of bank accounts, applying for essential services etc. 4. Frugal Innovation:
The most amazing frugal innovation of the decade by the TATA group, TATA NANO, aims to provide the lower and middle income groups an opportunity to own the four-wheeler and raise their status from a 2-wheeler owner.
This innovation by TATA group has unleashed a social revolution on a mega scale and has been recognized the world over. Many such frugal innovations are being developed to benefit the lower and middle income sections of the society. For ex: a water purifier at low cost to provide safe drinking water to the people.
5. MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act):
MNREGA is an act passed by the parliament to guarantee 100 days of employment at a fixed rate (now, to be adjusted to inflation every year) to the people who are unemployed and are ready to perform menial jobs.
This act provides employment to the people in rural areas who don’t have a source of income and, thus it unleashes development in the area as well as raises the income of the family so that they can sustain themselves.
With the implementation of MNREGA, unemployed people feel empowered as their source of livelihood is secured. Thus, MNREGA has become an assurance in the hands of the poor people by which the government is bind by law to provide employment to the needy section of the society.
6. Minimum Support Price (MSP):
MSP is a price fixed by a government for the produce of a commodity by the farmer and the rate at which it can be sold in the market.
I would like to term it as socio-economic innovation as it provides assurance to the farming community that their investment and effort will be safeguarded and, a MSP will be offered for their produce by the government and, if the farmer can fetch higher price than MSP then it is of significant benefit to the farmers.
The introduction of MSP raised the living of farmers and their dependents (as 65-70% of our population is dependent on agriculture). Though, it did have an effect on inflation as there was more demand (due to excess liquidity in the system) than supply. But, the socio-economic benefits experienced by the people were good for the country. 7. Solar Energy:
With the shortage of electricity in rural areas and to address the energy needs of the growing population, solar energy needs to be tapped and provided as an alternate source of energy to the people.
The Solar energy initially might seem to be costly (in terms of installation), but studies suggest that the rural/low income family daily spend on kerosene as a source of energy is Rs 250 -300. So, by incentivizing the equipment a much cheaper, reliable, stable and cleaner fuel can be provided to the people.
As the solar energy is abundant, this socio-economic innovation can deliver the energy needs of the people in an efficient manner.
Apart from the mechanisms and institutions highlighted above, there are many more socio-economic innovations that can improve the life of the people at large such as mobile toilets etc.
To conclude, a customized model of these approaches can be launched in other developing nations, as well, to benefit the people and, thus it goes without saying that socio-economic innovations help achieve the true potential of a country as all the sections of society participate in the growth and everyone feels part of the process.
This article has bee authored by Pramod Khandelwal from TAPMI.
Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.
If you are interested in writing articles for us, Submit Here