|
Target for March 10-Rs 4,60,000 crore- Credit gap over Rs lakh crore |
| |
Non-food Bank Credit |
Agri Credit |
| Mar 09 |
26,02,000 |
3,39,000 |
| Nov 09 |
27,16,000 |
3,43,000 |
Increase over March 09
% increase |
1,14,000
|
4,000
(3.5%) |
|
Source: RBI Statistics-M&M D 3rd Q Review 2009-10-Computed
The observation of Reserve Bank of India (in Macroeconomic and Monetary Developments Third Quarter Review 2009-10 )that credit flow to agriculture remained strong despite deficient monsoon-related weak economic activity does not appear to be based on factual position as shown by RBI’s own data of low credit growth during Kharif season affected by deficient rainfall. The actual increase during April-Nov 09 was a megre Rs 4,000 crore from out of NFBC increase of Rs1,14,000 crore , only 3.5% of increase in NFBC during the period. And khariff lending season, constituting half of total crop sowing for the entire year is over. Virtual stagnation in Agri credit during the first 8 months of FY2010 is the result. |
And the gap between mandated agri lendings (Rs 4.60 lakh crore) and actual (Rs 3.43 lakh crore) is over Rs 1 lakh crore to be extended in just 5 months covering Rabi season. Similar trend was there last year too, but suddenly swelled up during Feb/March 2009 by a whopping Rs 40,000 crore agri credit increase, after Rabi lending season too was over. No plausible reason could be divined for such sudden upsurge during lean lending season. An unbelievable feat indeed. Similar scenario is like to be repeated again this year too and we may be left wondering how this magic was performed!
|
“Banks were nationalised not to serve the people but to serve the politicians, and this they do very well”: MeghnadDesai |
*“This weakening of the Indian banking industry has been a matter of policy. The real reason for the nationalisation was, of course, that Indira Gandhi wanted to provoke the resignation of Morarji Desai and split the Congress. The evidence for this is in the memoirs of IG Patel who was in the finance ministry at the time and had to draft the legislation within 24 hours.”
|
“Banks, I am told, manipulate their targets for agricultural lending by loaning to fertiliser corporations! The lack of credit for farmers and for small businesses has been shown by many reports. Farmer suicides in the middle of the last decade were caused by the high cost of credit, among other reasons. These farmers were still relying on moneylenders”. Excerpts from: PSU banks are smug but small, FE 19010
|
| *The UPA generally, and the Congress in particular, have not established a shining track record of observing tight banking norms. The Congress has tended to treat the government ownership of shares as ownership of deposits also. There is a distinct danger that it might do so. BL 010210 |
Stagnant Yields : |
| The growth of food grains has been lower than that of the population for the first time since Independence, which is on account of stagnation in yields. The growth rate of productivity in rice and wheat was only 0.95 per cent and 0.87 per year during 1991-2005 compared to 3.28 per cent and 2.82 per cent between 1981 and 1990. TH -010210 |
Major Agri Reforms Needed to Improve Productivity
|
Indian agriculture is still run in an old-fashioned command and control mode where the government, and not the market, sets prices. Minimum support prices should be abandoned because they are a one-way street that follows the dictates of populism, rather than actual production and consumption. This is not to say that farmers should not get remunerative prices.
|
The government can, of course, help farmers get a better price by doing just two things: first, allow them to export, and second, allow big retail, including FDI in retail, to establish a greater presence—if they source directly from farms, farmers will get a better price since the commission of intermediaries will be bypassed. If that isn’t sufficient, particularly in times of drought, government can offer farmers income support in the form of direct cash transfers that don’t distort prices.
|
Of course, the government must invest in the upgradation of the ‘farm to market’ infrastructure—irrigation, roads, supply chains, just as it continues to invest in infrastructure for industry and services. |
The inefficient public distribution system that distorts prices and quantities, and fails to deliver food to the poorest in any case, must be abolished. Instead, like for vulnerable farmers, the government should have a direct cash transfer scheme for the most vulnerable consumers, which empowers them to buy food at market prices. Dhiraj Nayyar, FE: Feb 02, 2010
|
| Comments : |
| » Superb suggestion but implementation is the challenge |
Posted by K.R.S.Reddy on 2010-02-02 10:23:33.686698+05:30
The author is perhaps right in advocating doing away with fixing MSPs for farm produce and abolishing PDS and advocating cash transfer system and market driven price mechanism with free exports and imports regime and the Govt focusing on developing agri infrastructure. It is easily said than done. We need to cater to crores of families involved in this exercise and even the cash transfer system has to be operated through the very same inefficient and corrupt delivery system which causes millions of bogus ration cards being issued. And how cash transfers are to be given in the place of MSPs for over 110 million farmers’ house holds? These are daunting tasks that militate against their implementation. The author can do deep thinking on these practical issues and publish practicable ways of implementing the highly commendable solutions he has professed. |
| Food inflation rises to 17.5%: |
| “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” Johan Maynard Keynes
|
Food inflation inched up to 17.56 per cent for the week ended January 23 on account of rising prices of potato and pulses. Potato prices jumped by 44.91 per cent over the last year, while pulses became dearer by 44.43 per cent. |
