Of the total of 166million farmers, 84 per cent belong to the marginal and small categories and the earnings from agricultural activities help them merely maintain subsistence levels of living. The small and marginal farmers constitute a highly impoverished group. Hardly having any form of organization they lack a common forum to articulate their problems and often issues of concern to them are not addressed adequately. These categories of farmers have no say in pricing their produce and have limited access to credit facilities. This The National Agricultural Policy of 2000 observed "Agriculture has become a relatively unrewarding profession due to generally unfavourable price regime and low value addition, causing abandoning of farming and increasing migration from rural areas….".

2. Farming – Acute and Pressing Problems :

4.  High costs-low returns-Nearly half the farmers dislike their occupation :

5. High level of Indebtedness- Leading to Suicides :

Small and marginal farmers' households need credit to meet both consumption needs to maintain subsistence levels as well as for production purposes to meet the increasing costs of cultivation. Increased indebtedness is noted as a major reason for the spurt in farmer suicides during recent times the economic status of the suicide victim was very poor, being small and marginal farmers. Among the reasons for suicides, indebtedness featured as the prime reason. Although a direct link between distress and indebtedness has not always been established, the spate of suicides has been associated with it. After the Green Revolution agricultural activities have become cash based individual enterprises requiring high investment in
modern inputs and wage labour .This is evident from the list of states with high incidence of farmer suicides, which are not necessarily backward or

predominantly agrarian or with low income. A common feature that we discern is the high level of commercialization of agriculture and the trend towards cash crops in these states. Increased liberalisation and globalisation have in fact lead to a shift in cropping pattern from staple crops to cash crops like oilseeds and cotton, requiring high investment in modern inputs and wage labour, and increasing credit needs but when the prices declined farmers had no means to supplement their incomes . When crops failed and or prices went down they had no means to repay the loans, which drove them to the wall, as the saying goes. Desperate as they were and further burdened by a sense of social shame, ending one's own life might have provided an easy exit. With mounting debt burden along with the rising risks in production and price fluctuations leading to low remuneration, it is no wonder that a lot of distress is generated among the farmers. Incidence of indebtedness among farmer households was the highest in AndhraPradesh (82 per cent), followed by Tamil Nadu (75 percent) and Punjab (65 per cent).

6a. Role of credit in increasing agricultural output :

The growth in 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 NCUES 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 11.9 per cent in 2006.
Between 1972-1983 there were 21.2 million additional bank loan accounts in the aggregate given by the banks, of which 19.9 million, or 93% were accounts with credit limits of Rs10, 000 or less. This trend continued for another decade. Between 1992 and 2001 , however, there has been an absolute decline of 13.5 million in the aggregate bank loan accounts. This has happened entirely because of a larger decline 25.3 million accounts for the redefined small borrowal accounts of Rs.20,000 or less.
In the post banking sector reforms period, during 1992-93, small borrowal accounts(Rs.25000 and below) went down from 62.55 million  in March 1992  to only 38.73 million by March 2005.
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 remain unfilled for quite some time.

*Between 1991-92 and 2003, the number of operational holdings increased from around 93 million to around 101 million, whereas the area operated declined from around 125 million hectares to around 108 million hectares, resulting in a decline in average area operated from 1.34 hectares in 1991-92 to 1.06 hectares in 2003.
*The share of marginal farmers in total number of agricultural loan accounts declined from 51.7 per cent in 1980-81 to 37.4 per cent in 1995-96, before recovering to 44 per cent in 2004-05.
*Share of small borrowal accounts with a credit li mit of less than Rs.25,000 in total number of agricultural borrowal accounts declined from 85.4 per cent at end-March 2000 to 55.9 per cent at end-March 2007.
*The share of agricultural credit outstanding to small borrowal

Rs.2 lakh in total agricultural credit declined from 80.9 per cent at end-March 1992 to 67.6 per cent at end-March 2000 and further to 42.6 per cent at end-March 2007.
of Farmers (2003) bring out their dismal state as the following statistics show:

 i) Percentage of non-institutional credit, with  very high rate of interest, is taken more by  Marginal and Small Farmers than by other farmers with larger land holdings whose share in institutional credit ,with normal interest ,is more.

iii) Average monthly per-capita consumption expenditure(MPCE)2004-05.The poor and vulnerable constitute 77% of the total population .The share of poor in monthly consumption expenditure has come down  by 50% during economic reforms period., while mpce of middle and high range people increased by 15%.

iv) Average monthly income per family household (Rs./Month) from cultivation 2003
The monthly income from cultivation derived from cultivation by marginal and small family holdings in not sufficient to eke out lively hood by marginal and small farmers. (Rs/Month)

MF:Marginal  less than 1 Ha, SF:Small1.01-2.00 Ha,SM:Small medium 2.00 -4.0 Ha
M;Medium 4 – 10 Ha, L:Larger Over 10 Ha..

a) The small and marginal farm holdings account for 42.0 per cent of agricultural land; but the share of small and marginal farmers, who form part of weaker sections, was only 21.3 per cent in the total advances to agriculture at end March 2007. The credit to this sub-segment should have been double of what has been given.
The bank credit to small farmers is very low at around 3% of the total credit. Arjun Sengupta recommended 10% of bank credit should be allocated to this segment. If these recommendations are implemented the quantum of loans to this segment will treble

(b)Size of Credit Limit-wise Classification of Outstanding Credit of SCBs (end-March)
The share of small loans of Rs 25,000 and below reduced to13.3% from 49.5% in 1996, where as the share of big loans has more than doubled, from 25% to 55% during the same period.
(Rs in Crore –Accounts’000)

C. Differentials in income and expenditure
Average Monthly Expenditure and Income by Farm Size for Rural Farmer Households: All-India 2003

The average monthly expenditure of a farmer household at Rs.2770 is higher than the monthly income of Rs.2115 indicates that the expenditure levels are higher than the income, especially for the small and marginal farmers. The threshold of land size where monthly income of farmer
household is higher than the monthly expenditure is 2 hectares. The income levels of farmers below this land-size group are not able to meet the consumption needs of the household.
E. Prevalence Rate of Indebtedness by
Farm Size, All India (Percentage) 2003

- 2.00), Medium-Large (> 2.00) Hectares.
Source: NSS 59th Round 2003, Situation Assessment Survey of Farmers. Computed.
Findings of Situationa Assessment Survey

About 48 per cent of farmer households had loans outstanding in 2002-03. The prevalence of outstanding loans was the highest among medium and large categories of farmers (58 per cent). Prevalence rate for formal sources among marginal and small farmers was much lower than for large farmers, while in the case of informal sources the reverse was true. The medium and large farmers have better access to institutional sources as they are better endowed in terms of assets to offer as collaterals for loans than marginal and small farmers.

5. Recommendations of National Commission on unorganized sector enterprises (NCUES), 2007

(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.10 million and for even higher amounts for indirect agricultural activities. The limit of loan for activities eligible for direct agriculture has been raised to Rs.2million. 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 presently assigned
(ii) Close monitoring by RBI of the credit flow to this segment of farmers i.e. marginal and small farmers.
for agriculture, be fixed for farmers with land holdings below 2 hectares
(iii) Measures to extend credit to the 20 – 40 per cent of the marginal and small farmers who are excluded from the formal financial sector due to lack of patta and title deeds.
The Commission is of the view that the 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.

6.CIFA proposals, 2008

(A) It is unfortunates that the RBI continues to dilute the norms for achieving direct finance to weaker sections even after Sengupta commission pointed out such dilutions in the past and cautioned against moves to water down the spirit of extending credit to disadvantaged and unorganized groups. CIFA strongly demands that policy dilutions made by the RBI as detailed above in paragraph 1 should be withdrawn and only direct credit to weaker sections for the purposes of generating incomes should be reckoned toward weaker sections finance target. The target should be increased to 12% as recommended by the commission. CIFA further urges the RBI and the Government to implement the recommendations of the Arjun Sengupta Committee (detailed in paragraphs 2 to 4)   and also recommended by   the IWG of the RBI, to accelerate credit flow to weaker sections. The IWG suggestion that RBI may consider measures to penalize banks for failure to reach the sub target set for weaker sections should be made operative forthwith.
Loans to weaker sections should be given on composite basis covering credit needs for purchase of machinery, equipment etc, working capital and consumption needs for one year repayable from out of net income generated over period of 10 years. D.I.R scheme of interest rate at 4% should be charged for loans given to weaker sections up to Rs 2 lakhs.

 (B)Enhancing skills acquisition & capabilities :

(ii) Establishing mini rural agro processing and rural service centres for selected clusters of villages, with provision of infrastructural facilities like, roads, water, power sheds and godowns and marketing linkages is the ideal solution for providing non farm employment in rural areas. Big industrial units, banks, insurance agencies and philanthropic institutions can adopt these rural processing and service centres and provide man power, material and monetary resources. A system of reservation of items manufactured in rural centres should be evolved to ensure assured market for the products. Mega agro processing centres are capital intensive and can provide employment for only a few hundreds, where as for the same investment, rural mini agro processing and rural service enterprises with simple machines can engage many thousands of semi skilled people.

(iii) Young rural people should be provided vocational training in various manufacturing processes and crafts for which there are raw materials available locally and this vocational training can start immediately after a person completes VII standard. At the end of vocational training, they should also be imparted training in entrepreneurial capabilities the absence of which is resulting in failure of many self employed enterprises in the un-organized sector. After these kinds of trainings, they should be encouraged to be taken as apprentices in established processing and service units. Meritorious students should be provided opportunities for higher learning. There can be a system of reservations up to say, 25% for these rural meritorious candidates in higher learning centres. Thus trained and equipped, they are ready either to start their own unit or be gainfully employed. The need of the hour is to train lakhs of rural people by enhancing and equipping  thousands of rural ITIs than pour thousands of crores of rupees in establishing a few IITs/ IIMs which train only a few thousands. The priority should be changed towards training rural youth for employment than pour thousand of crores of money to benefit already highly qualified people who go abroad anyway and get employed and the investment in IITs/IIMs is a loss to the nation. Training rural youth is a gain to the nation.

 (iv)Providing grading facilities and godowns for storage as well as marketing arrangements and linkages with retail chains are the neglected areas so far and to make any rural employment to be successful, these arrangements are essential and the government and Producers’ organizations have an important role to play in making these arrangements.
(v)Rural youth have the same potential as urban youth. If necessary facilities and opportunities are provided they will prove equal to their urban bred and urban educated cousins. What is required is change in the mind set of the Governments, Planning Bodies with focus on employment and income generation than on mere Macro GDP numbers. So our Planning Mandarins should change their mind set and have as objective,  providing opportunities for employment and income generation, and not macro level increase in GDP which benefits only a few who already have wealth and higher education anyway. Top down planning should be replaced by bottom up planning.
  If focus is changed from mere GDP growth to employment growth and growth in incomes of the lower half of the populace, then we can see a SHINING INDIA where most of the people are smiling, than the present India where 25% are smiling and 75% are weeping.

It is pertinent to mention the heart felt and soulful observations of Prof. M.S. Swaminathan in his Report of National Commission on Farmers-2006.
“Economic growth which bypasses a large population is joyless growth and not sustainable in the long run. What then is the future for India’s rural population numbering over 700 million? We cannot be silent onlookers to a situation where 30% of India is shining and 70% is weeping. Equity considerations can not be ignored for too long. Faster growth in agriculture with improvement in welfare of the rural population is important. The need is not only to register increase in agriculture (rural) production in million tons but actual improvement in rural incomes”  Recommendations of the NCF to empower farmers

v) Adequate Credit and full Insurance cover: The banking system needs to meet the large unmet credit potential needed to raise agriculture, at 4% interest rate. (Presently only half the farmers are covered, that too with insufficient credit)Agriculture is a high-risk economic activity. In drought prone areas, credit should not be just for the season, but for a Credit Cycle of 4-5 years and include consumption credit, so that the farmer has the capacity to spread his/her liabilities and meet the repayment requirements. The banks need to liberally provide pledge loans. However, as there are not many accredited god owns, the bankers may have to rely on storage of produce with the farmers.

Agricultural progress should be measured by the growth in the net income of farm families. Along with production growth rates, income growth rates should also be measured and published by the Economics and Statistics Directorate of the Union Ministry of Agriculture.
  The Ministry and Departments of Agriculture both in the Centre and States may be restructured to become Ministry / Department of Agriculture and Farmers’ Welfare in order to highlight their critical role. Agriculture is not just a food producing machine for the urban population, but a major source of skilled and remunerative employment and global outsourcing hub.

viii) TO INCLUDE AGRICULTURE IN THE CONCURRENT LIST

ix) TO ENTRUST RESPONSIBILITY TO PANCHAYATS

An Agriculture Risk Fund should be set up to insulate farmers from risks arising from recurrent droughts and other weather aberrations,
Prime farmland must be conserved for agriculture and should not be diverted for non-agricultural purposes and for programmes like the Special Economic Zone.

84% of farmers are small and marginal, and, increasingly female. Special steps will be needed to improve their effective access to inputs, credit, extension services, and output markets. It is now well recognized that the poor are best empowered if they function as a group rather than as individuals and that this is also the best way to secure economies of scale. Hence for the poor and for women to gain and be effective farmers we should encourage a ‘group approach’. This could range from low levels of collective functioning such as joint investments in lumpy inputs such as tube wells or co-operatives for input purchase and marketing, to high levels of collective functioning such as land pooling or even joint purchase of leasing of land and joint farming. A group oriented approach could benefit small farmers on many different fronts:
• Investment in irrigation and irrigation delivery systems

• Information and input delivery.
• Product marketing.
• Promoting land access.
• Land pooling of owned land, or joint purchase or joint leasing in and group farming.
• Contract farming.
An important task in this context will be to examine the nature of subsidies in current schemes. There is a strong case to redesign these subsidies, giving greater benefits to PRIS/farmers groups than individuals,
so as to incentivize group formation particularly amongst small, marginal, and female farmers.
Managing vulnerabilities and demographic change: All precaution must be taken to ensure that the poor do not get further excluded as a result of contingencies, whether natural or a part of the economic growth strategy. In particular, there should be no fear that they will lose their lands involuntarily to larger entities:
• Survey/settlement should be completed and land titles and their mutations issued and recorded properly. If this is done, modern IT/GIS technologies
could be used to build an online registry of farmers and their land status. This would not only bring confidence but also enable better credit linkage and eventually allow subsidies to be passed on to farmers directly.
• There is no justification, at this stage, for encouraging corporate farming by relaxing the existing ceiling on land ownership. In fact, if the registry above is done properly, some ceiling-surplus land will be available for distribution. In any case, since many richer farmers are exiting agriculture voluntarily, small farmers should be assisted to buy land through the provision of institutional credit on long-term basis at a low rate of interest.
• At the same time, the land-lease market should be liberalized. The two major elements of such reform are: security of tenure for the tenants during the period of contract and the right of the land-owner to resume land after the period of contract is over. The right should be especially firmly available to small farmers.
• Special programmes need to be designed and implemented to enable small farmers to improve their capacity to go for high value commercial activities in crop production, dairy, poultry, fisheries, etc.
Gender equity: With the share of female workforce in agriculture increasing, and increased incidence of female-headed households, there is an urgent need to ensure women’s rights to land and infrastructure support:
• Women’s names should be recorded as cultivators in revenue records on family farms where women operate the land having ownership in the name of male members.
• The gender bias in functioning of institutions for information, extension, credit, inputs, and marketing should be corrected by gender-sensitizing the
existing infrastructure providers.
• Women’s co-operatives and other forms of group effort should be promoted for the dissemination of agricultural technology and other inputs, as well as for marketing of produce.
• Wherever possible a group approach for investment and production among small scale women farmers, be it on purchased or leased land, should
be promoted. Women farmers are typically unable to access inputs, information, and market produce on an individual basis. A group approach would empower them.
 Regional balance: A problem, not peculiar to agriculture, is that poorer States that have poor infrastructure not only miss out on private investment but also cannot avail many Central government programmes. The Bharat Nirman initiative is attempting to rectify some of this so far as rural areas are concerned but two sources of bias in agriculture against poorer States need to be corrected:
• The Rural Infrastructure Development Fund (RIDF) recycles to States for infrastructure creation banks’ shortfall in agricultural lending from priority lending norms. This should ideally go to those States and benefit those who have least access to credit. In fact, most RIDF funds go to States where rural credit–deposit ratios are relatively high. This should be corrected, along with RIDF allocations changed from being year-to-year to a longer allocation so that this can be built properly into State and district plans.
• Regions with poor market infrastructure are usually excluded from MSP operations by Central agencies. Since this leads to a double disadvantage for farmers in such regions, some arrangement needs to be made, for example a revolving price stabilization  fund, so that short-term credit from this can be easily availed by PRIs to do their own MSP purchase which can then be delivered to the Central agencies involved.

ANNEXURE:

Reduction in institutional credit to small holders and small enterprises:
Surveys such as the Situation Assessment Survey of Farmers (2003) bring out sorry state as the following statistics show:
  a) Percentage of non-institutional credit, with very high rate of interest, is taken more by Marginal and Small Farmers than by other farmers with larger land holdings whose share in institutional credit, with normal interest, is more.

  b) RICH FAMERS ARE PREFERRED AGAINIST POOR FARMERS FINANCE AND AGRICULTURE-DECLINING TREND EVERSINCE REFORMS ARE INITIATED FROM 1990s
  bi) Sharp decline in the share in amount of small Agri. loans is noticed (Rs.25,000 and less) compared to share in 1990) (percent)

Bii) Yet during the same period, share of Agri advances of Rs.1 Crore  and above increased by a whopping 400%.
March2006 –amount of agri loans  (Rs.in Crores) (Accounts ,000s)

ci) DECLINING RURAL CREDIT/DEPOSIT RATIO DURING ECONOMIC REFORMS PERIOD
The agri credit as well as rural credit deposit ratio sharply declined during the period:

As on March 2007, all India C/D ratio was 75%. C/D ratio of Metros was 88%, while that of rural areas was only 61%. Had rural C/D ratio were to be the same as that of all India C/D ratio, more loans could have been given to  farmers and rural artisans.

cii) As on march 2001, outstanding credit of commercial banks in rural and semi-urban areas was 21.6% which declined by one fourth, to 17.6% by March 2007.During the same period, credit outstanding in metro cities increased from 61.65 to 66.1%, clearly indicating diversion of funds from rural and semi-urban areas to metros.(RBI MB JUN 08)

During pre-reform period, RBI stipulation was that Rural credit/deposit ratio should not be less than 60%,rural credit would have been 50% more than what was advanced, had this stipulation been adhered to by banks in 90s,thus depriving development  of rural economy considerably.
KRSR-150409