25/11/2019 - Agriculture | Mainstorming

IAS Parliament 5 years

KEY POINTS

· There has been a healthy off-take of ground-level credit (GLC) in agriculture and allied sectors. In the financial year (FY) 2018-19, banks disbursed Rs 12.55 trillion as GLC to agriculture, surpassing the government’s target of Rs 11 trillion.

· The massive growth during 2000-01 to 2007-08 appears to be due to an innovative credit instrument, the Kisan Credit Card (KCC), and a policy intervention, the Interest Subvention Scheme, which incentivised short-term credit.

· Interestingly, the All India Financial Inclusion Survey (NAFIS) of 2015-16 by NABARD reported that 30.3 per cent of all agriculture households availed credit from institutional sources.

· The fact that almost 70 per cent of agri-households did not avail institutional credit shows that there is much scope for the banking sector to extend its reach — be it lending for production purposes (crop loans), investment or even consumption purposes.

· The interest subvention scheme created opportunities for farmers to take crop loans at subsidised interest rates from the banking sector and then divert them for non-agriculture purposes.

· Since long-term credit is basically for investments and capital formation in agriculture, this dramatic fall in the share of such credit takes a heavy toll on farm productivity and the overall growth of the agri-sector.

· For the sake of transparency, all crops loans, especially that availing interest subvention, should be routed through Kisan Credit Cards.

· The reluctance of farmers to use Kisan Credit Cards requires more research. Even then, the issuing of these cards in remote villages needs to be expedited.

· A bolder step in this direction would be to empower farmers by giving them direct income support on a per hectare basis — rather than hugely subsidising credit.