2009  PARLIAMENT ELECTIONS

FARMERS OF INDIA-VOTE WITH WISDOM

Economic organisation of farmers, particularly the marginal and small farmers, which could have helped them overcome the size constraint, is extremely insignificant. Rising costs of cultivation, low remunerations, high risks with frequent crop failures, declining agricultural growth, and mounting debts have all led the farmer to a distress like situation. Nearly 40 per cent of the farmer households disliked their occupation. The main reasons for this disinclination were the lack of viability of farming, followed by its perceived risks.

One of the key policy instruments to provide access to credit to the small industries was the RBI directions on 'priority sector' lending. The commercial banks were asked to advance 40 per cent of their net bank credit to the priority sector. This included the small and tiny enterprises for which, however, no separate targets were specified. However, there has been a change in the banking policy since the economic reforms of 1991. The concept of priority sector lending itself has come under attack, with the suggestion by the Narsimhan Committee Report (1993) that the 40 per cent direct credit to the priority sector should be phased out. While this recommendation has not been implemented, there has been a dilution of the priority sector lending policy. The operational relevance of the priority sector lending has been weakened by the inclusion of a vast number of items, including agricultural machinery, direct finance to the housing sector etc.

Agriculture in the early periods was facilitated by the spread of rural credit institutions and improved access to credit. A step in this direction was the nationalisation of banks in 1969 and making imperative that the banks expand their rural coverage. The Commission is concerned that the position of institutional credit with respect to agriculture and more so, with respect to marginal and small farmers continues to be extremely unsatisfactory. The share of agricultural credit in the Net Bank Credit (NBC) declined from 17per cent in 1994 to 9 per cent in 2004. Agricultural credit as a percentage of NBC it still stands at a low 12 % in 2006. The number of commercial banks branches in rural areas declined from 35,134 in March 1991 to 30,572 in March 2006.A large number of staff vacancies remains unfilled for quite some time.

4) Apathy and dilution at policy level

(i)Change in the priority sector guidelines with a target of 10 per cent needs to be fixed for marginal and small farmers. The agricultural quota includes direct agricultural loans to corporate entities up to Rs.1 Crore and for even higher amounts for indirect agricultural activities. The Commission recommends that the priority sector guidelines of the RBI be amended and a 10 per cent quota, out of the 18 per cent assigned to small and marginal farmers.
(ii) Close monitoring by RBI of the credit flow to this segment of farmers i.e. marginal and small farmers; be fixed for farmers with land holdings below 2 hectares
(iii) Extend credit to the 20 – 40 % of the marginal and small farmers who are excluded from the formal financial sector due to lack of patta and title deeds.

(iv) Government may set up a Credit Guarantee Fund in NABARD, on the lines of the CGF set up by the Ministry of Micro, Small and Medium Enterprises which provides guarantee cover on loans to small units.

TO DATE, THESE RECOMMENDATIONS WHICH WILL HELP SMALL FARMERS AND SMALL ENTERPRISES ARE NOT IMPLEMENTED

Observations of Consortium of Indian Farmers Associations (CIFA)

In post reform era, there has been studied indifference of financing priority sectors. Neither the Government nor the RBI, bothered to reverse the trend. The RBI also very silently refined priority sector and allowed loans given to big borrowers also to be included under this category. It is very clear that during the decade commencing from 1991, the successive governments neglected loaning to agriculture sector, the RBI was a silent spectator and banks took cue from this and decelerated the quantum of loaning to priority sectors. Now is the time for implementing forthwith the recommendations of NCEUS  to better the lot of Marginal and Small Farmers, who constitute more than  80% of all the farmers and all enterprises.