T.V. Gopalakrishnan

The need to support the rural sector has been well recognised and the efforts in this direction have been enormous and institutions set up to aid this sector are aplenty.

The allocation of resources exclusively to develop the agriculture and other rural segments of the economy by the Central and State Governments, financial institutions and other agencies is huge by any reckoning and the results achieved are commendable, but fall short of expectations. Definitely, the contributions from the rural sector, particularly from agriculture, are not commensurate with the resources spent or allocated.

The agricultural sector, hitherto considered to be the backbone of the economy, cannot and should not remain weak for long. The sector, unfortunately, is still gambling on monsoon and dependent on informal credit .The problems encountered by the farmers (particularly small farmers and people from rural areas engaged in different vocations belonging to lower segment) broadly relate to inability to understand and take advantage of various facilities available from commercial banks, regional rural banks, cooperative banks, local area banks, government agencies, self help groups and micro finance institutions. Their problems arise from the absence of a steady income, high fluctuations in the prices of their products, high level of inflation affecting their limited and uncertain income, increased input costs, and undependable infrastructure such as electricity, transport, marketing and storage facilities.

There is an urgent need to find a change in approach to turn the rural sector regain its share in GDP growth.

Basically, development of agriculture and rural sector is a State subject and the initiative and leadership would have to come from the States. The introduction of Rural Development Index, based on which allocation of resources and grant of incentives by the Central Government can be made, can perhaps be a good beginning. The index should reflect improved rural infrastructure, enhanced productivity in agriculture, augmentation in productive rural assets including agricultural land and stoppage of migration of labourers to urban areas, reduction in poverty level, and change in the confidence of the people to continue to show interest in agriculture and rural activities.

Constructive role

National Bank for Rural and Agricultural Development (Nabard) has to play a constructive role in ensuring that the coordination between the States and the institutions involved in rural development is smooth and result-oriented. Nabard needs to have a very focused and different approach for each State in identifying the gaps, deficiencies and problems in the development of agriculture and rural industries and providing the needed coordination, support, guidance and encouragement to the agencies involved therein.

The multitude of agencies adds confusion and conflict of interest giving room for unhealthy practices, corruption and abuse of facilities. The approach should be preferably to have a single window concept and the institution should coordinate the support system including insurance for the borrowers with the aid of Nabard.

The institution having a strong presence in terms of business, infrastructure and having proven commitment in serving the people should take up the role. The commercial banks should gradually give way to regional rural banks (wherever feasible), strong cooperative banks or local area banks and micro finance institutions.

Nabard can play an active rural in identifying the institution fit to serve a particular block or area and provide the leadership.

The State Government and Nabard have to jointly change the rural face by introducing incentives and awards for the retention of interest in agricultural and rural activities both among providers of credit and borrowers. Information technology and the proposed Unique Identity Card can be of great help to optimise the distribution of credit and making financial inclusion a reality.

The involvement of top management institutes and social workers can be thought of to activate the rural economy and realise enduring real benefits to the whole economy and its people.

(The writer is former Chief General Manager, RBI)

(This article was published in the Business Line print edition dated June 28, 2010)
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