Definition & Role of Priority Sector in Indian Economy

The priority sector in the Indian economy refers to those sectors that receive special attention and support from the government and the banking sector to promote their growth and development. The Reserve Bank of India (RBI) has identified certain sectors as priority sectors based on their importance in the overall economic development of the country.

The priority sectors in the Indian economy include agriculture, micro, small and medium enterprises (MSMEs), export credit, education, housing, renewable energy, and social infrastructure. The objective of focusing on these sectors is to ensure that adequate credit is available to these sectors and to support their growth and development.

The role of the priority sector in the Indian economy is significant. The agriculture sector, which is a priority sector, is the backbone of the Indian economy and provides employment to a significant portion of the population. The MSME sector, which is another priority sector, is a major contributor to employment generation and exports. The focus on education and housing sectors helps in improving the overall standard of living of the people.

The RBI has set a target for banks to lend a certain percentage of their total loans to the priority sector. Currently, the target is set at 40% of the Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (OBE), whichever is higher. This ensures that credit is made available to the priority sectors, which otherwise might have difficulty in accessing credit.

In conclusion, the priority sector plays a crucial role in the Indian economy as it includes sectors that are important for overall economic growth and development. The focus on these sectors ensures that adequate credit is available to promote their growth and development, leading to employment generation and improved living standards. The government and the banking sector need to continue to support the priority sector for sustainable economic growth and development.