Money is getting diverted away from small farmers: TISS Agro Economist

NS Vageesh Mumbai | Updated on January 09, 2018

The flow of agricultural credit may have increased from ₹96,000 crore in 2004 to ₹10 lakh crore now; about 18,000 new rural branches have been set up and yet there is an agrarian crisis because of definitional dilusions as well as diversion of funds from the needy small farmers, Professor Ramakumaar, Agro Economist, Tata Insitute of Social Sciences (TISS), said on Monday. He was speaking at the AIBEA's National Banking Conclave.

He pointed out that one fourth of the direct agriculture finance given to farmers in India is through Urban/metro branches. The figures are even more striking in the case of West Bengal where 55 per cent of direct agricultural finance is done through Urban and Metro branches, largely in Kolkata, he said. This was followed by Maharashtra (37 per cent) and Tamil Nadu (32 per cent).

Further, he said, 50 per cent of the agriculture credit is given in the months of January, February and March by which time the Kharif and Rabi crop seasons are over. It is no wonder that farmers complain that they are being shut out of funds when they need them, he said.

Declining rural banking

Lauding the nationalisation of banks in 1969 and the subsequent policy initiatives on priority sector as genuinely helpful to agriculture, Prof. Ramakumaar said that the financial inclusion agenda being followed now is not comparable in its impact. He said that the share of moneylenders had increased from 17 to 27 per cent during the first decade after the reforms era in India, which meant that the share of rural credit from the formal sources and public sector banks stood reduced. He called the 1990s the lost decade of rural banking.

Pointing out that the rich were cornering the funds meant for the poor, he said that in 1990, with respect to the direct finance on agriculture, 92 per cent of the loans were less than the size of ₹2 lakhs (which is generally understood to be a threshold for small farmers). Now, only 46 per cent of the direct agricultural finance is less than ₹2 lakhs as on date, which means that 54 per cent of direct agricultural finance is over ₹2 lakhs (or going to richer hands).

Rising debts

Quoting from the All India survey of Rural debt, he said that the number of farmers who were indebted had risen from 25 per cent of rural households in 1992 to about 46 per cent in 2013. More worryingly, the debt-asset ratio of the farmers have been increasing over the years from 1.6 per cent in 1992 to 2.5 per cent in 2013. He said that this shows the intensification of the debt burden on the farmers.

He contested the common perception that there is a moral hazard with regard to farm loan waivers and argued that farmers are the most disciplined re-payers of loans. He said that doubling of farmers income by 2020 would not be possible when agriculture is growing at around 2-3 per cent while it should be growing at 14 per cent.

Published on November 20, 2017

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