In this essay we will discuss about:- 1. Role of Agriculture in Indian Economy 2. Initiatives and Efforts for Improvisation of Indian Agriculture 3. Measures for Improving Flow of Credit to Agriculture—Special Agricultural Package Announced by Government in 2004.
Essay on Agriculture and Indian Economy
Essay # 1. Role of Agriculture in Indian Economy:
Agriculture is the largest sector of economic activity in India and has a crucial role to play in the country’s economic development by providing food to people, raw material to industries, employment to very large population, capital for its own development and surplus for national economic development.
The distribution of national income shows that the share of various agricultural commodities, animal husbandry and ancillary activities has always been more than 40%. During eighties and subsequently during 1990-91, this has fallen to 33% and has further gone down to 24% in recent times. This trend of declining share of agriculture in national income is broadly in consonance with the conclusions derived by the development economies.
During last 70 years, the size of labour force dependent on agriculture had more than doubled and over the next decade it is projected to up by more than 25%. The occupational structure of the country has shown a lack of flexibility. Large proportion of increasing labour force has been absorbed in agriculture due to absence of any alternative employment opportunities and would only add further to the already low production and disguised unemployment.
Essay # 2. Initiatives and Efforts for Improvisation of Indian Agriculture:
India ranks no. 1 in the world in:
a. Irrigated area
b. Cattle population
c. Buffalo population
d. Milk production
e. Pulses production
f. Tea production and
g. Jute production.
And ranks no. 2 in respect of:
a. Paddy production
b. Wheat production
c. Groundnut production
d. Sugarcane production
e. Onion production
f. Fruits and vegetable production and
g. Tobacco production
India’s total production of food grains increased from 50 million tonnes during 1950s to more than 200 million tonnes, a four-fold increase in food grains production after green revolution.
1. Farmers’ Need Assessment:
A study conducted to assess the priority needs of the farmers reveal that, access to market, credit and information/advise are the top three important priorities for farmers. Other priorities are storage, crop insurance, quality inputs, agricultural implements, etc.
2. Marketing of Agricultural Commodities:
Marketing of agricultural commodities face the problem of scale, problem of information (farmers do not know when to start planting, harvesting, selling, etc.).
Market inefficiency, price spread, too many players between producer and consumer, resulting in only 30% of what consumer pays is reaching the producer.
3. Govt. Extension Services:
The farmers saw field level govt., extension officers more as suppliers of inputs than providers of technical services. Nowadays private extension is gaining momentum with a package of services like, technical advice, market information, credit and other support services at cost.
The concept is gaining ground with the transformation of agriculture from a traditional activity to a commercial activity. Hitherto, the village fertilizer and pesticide dealers have become defacto extension specialists with their limited knowledge. The initiative of central government to establish agri-clinics and agribusiness centres involving qualified agriculture and veterinary graduates with credit support from commercial banks is a welcome sign in this direction.
Central and state governments have established information kiosks (Kisan Call Centres) for transfer of information from laboratory to land. They need to be further strengthened with qualified staff to provide instant technical guidance to the farmers.
Indian agriculture is suffering with production by masses when compared with other developing/developed countries where mass production is achieved. One of the critical components of agricultural development is “credit”. Even after 35 years of nationalisation, only 1.9 crores out of 12.7 crores farmers are able to access credit from banking sector leaving a huge gap of 10.5 crores farmers yet to be reached with credit by formal banking institutions. Apart from this crores of landless agricultural labourers are deprived of the institutional credit from banks, inspite of several initiatives of government for poverty alleviation.
4. Induction of Commercial Banks (CBs) into Rural Credit:
As the gap between demand and supply of rural credit was very large so there was need to solicit support of the commercial banking sector for supplementing the government effort for providing credit access to rural people and with a view to ensure that the credit and development efforts are directed to the desired sectors of the economy, Government of India brought the social control over commercial banks in 1967.
However, the voluntary control could not motivate commercial banks to the desired extent. The entry of commercial banks into rural lending was facilitated by nationalization of 20 major commercial banks in two phases. The move was further followed up by Reserve Bank of India (the central banking authority) with the introduction of obligatory credit allocation by all commercial banks to priority sector (40%) which includes most of the lending to rural and small enterprises. The decentralized credit planning through Lead Bank Scheme was also introduced.
Under these measures, banks were allowed to open large number of rural branches and recruit agricultural specialists to handle the volume of rural lending. All the 466 districts in the country are placed under one or other of the commercial banks called the District Lead Bank who spearheads the credit allocation for Rural and Priority Sector Lending by all Formal Credit Agencies at the District Level. Similarly, lead banks also were appointed at the state level to plan and monitor the credit flow to various sectors in the state.
5. Regional Rural Banks:
Despite all these efforts, the credit access for the poorer sections of the society was limited when compared to richer clientele and the commercial banks were not tuned to the needs and requirements of the poor and small agriculturists. The co-operatives on the other hand had low resources to meet the expected demand.
The solution was sought by establishing a separate banking structure, which would have the advantages of both the co-operatives (local presence) and commercial banks (business and resource base). With this background, the regional rural banks were started as a low cost commercial banks operating in rural areas and provide credit to rural poor. The RRBs are jointly owned by the Central Government, State Government and a Commercial Bank/State Cooperative Bank in the ratio of 50:15:35.
6. National Bank for Agriculture and Rural Development (NABARD):
A committee appointed by Government of India had reviewed the entire arrangement for institutional credit for agriculture and rural development and suggested that there is a need to provide undivided attention for development of rural credit system. Based on the recommendations, NABARD was set up in the year 1982 by integrating the rural credit functions of other agencies and Agricultural Credit Department of RBI to provide credit for the promotion of agriculture, cottage and village industries, handicrafts, other rural crafts and allied economic activities in rural areas in order to secure integrated rural development. Since its inception, NABARD is discharging its mandate through activities relating to credit planning, financial assistance, institutional development and promotional efforts.
Government of India and RBI jointly owned the equity of NABARD. NABARD raises its resources through re-deployment of surpluses, borrowings from multilateral and bilateral institutions, borrowing from the market, institutional deposits and contributions received from Reserve Bank of India.
7. National Agricultural Policy of Government (2002-2007):
The Agricultural Policy of the Government aims at achieving 4% growth even- year in agriculture with a focus on ― (a) Technology (b) Policy, and (c) Institutions.
Technology and Globalisation:
i. To increase production at least 4% per annum in all facets of agricultural sector.
ii. Investments to upgrade the information technology related to agriculture.
iii. Technology to link the farming community with local and global markets.
iv. Use of precision farming technologies that can serve national resources and agricultural inputs through appropriate policies.
Agricultural Policies and Globalisation:
i. To help enhancing agricultural trade.
ii. To increase export of agriculture and food products.
iii. To facilitate the process of integrating Indian agriculture with global economies.
Institutions and Globalisation:
i. Institutions to apply rules and policies to protect law and order and to ensure property rights.
ii. Institutions to attract capital inflows into agriculture.
iii. Improved domestic policies in financial sector by lending institutions for agriculture.
iv. Services to small and medium farmers via community-based savings instruments and credit for micro-enterprises that add value to agricultural commodities before they are exported/marketed.
v. Social safety nets and investments in education and skills that equip farmers to diversify their income generating activities.
Essay # 3. Measures for Improving Flow of Credit to Agriculture—Special Agricultural Package Announced by Government in 2004:
Agriculture sector is given improved thrust by the government as it plays crucial role in the overall economic development of our country by contributing 24% to GDP. The Union Finance Minister on 18th June 2004 announced an action plan involving a package of measures aimed at alleviating the dept., burden of drought hit agricultural borrowers and enhancing credit flow to Agriculture.
I. Measures announced for Extending the Scope of Institutional Credit to Farmers:
i. Doubling of credit to agriculture by commercial banks in a period of 3 years.
ii. 30% increase in agricultural credit over flow of credit to agriculture during 2003-04.
iii. Kisan Credit Cards—Every effort is made to enhance coverage of institutional credit including through KCCs.
iv. Outlets of bank branches will be energized to enhance flow of agricultural credit.
v. Commercial banks will be advised to bring to their fold at least 100 new farmers and semi-urban branch during the current year (2004-05) with an aim to financing an additional number of farmers by banks.
vi. In every district, all commercial banks put together will finance 10 agriclinic during the current year (04-05).
vii. Each rural and semi-urban branch will take up at least two to three new investment projects in the areas of plantation and horticulture, fisheries, organic farming, agro-processing, livestock, micro-irrigation, watershed management, development of village ponds, etc.
viii. Loans to weaker section. Target of 10% to be achieved by banks. Public sector banks to lend more to small and marginal farmers.
II. Measures announced for alleviating the Debt Burden of Draught-hit Agricultural Borrowers:
The package contains an OTS scheme (one time settlement) for small and marginal farmers (to cover defaulters as on 31.03.2001) and includes introduction of the following new schemes:
1. Special scheme for distressed category of farmers who were affected by natural calamities and proposing rescheduling of loans with a scope for further lending.
2. Special scheme for farmers who have irregular loans and are not wilful defaulters (i.e. those affected by other calamities) proposing reschedulement of loans with scope for further lending.
3. Special provision for relending to farmers who had settled their earlier loans through OTS/compromise, etc.
4. Relief measures for farmers indebted to non-institutional lenders (takeover of loans from money lenders).
Detailed guidelines were issued to all commercial banks during July 2004 for implementing the above packages:
Further, RBI has relaxed the guidelines of service area approach with a view to facilitate rural borrowers to have easy access to institutional credit from any bank of their choice at a competitive price and to provide banks, public and private with a level playing field.
State Bank of India:
State Bank of India has taken initiative to do away with scales of finance fixed for various crops by district technical committees to facilitate farmers to avail need-based production loans based on the improved package of practices followed by farmers for growing crops.
Bio-Villages:
A new development paradigm for rural development by M.S. Swaminathan Research Foundation, Chennai.
The concept of “Bio-village” involves concurrent attention to the conservation and enhancement of natural resources and poverty eradication. It is based on a pro-poor, pro-nature and pro-women orientation to technology development and dissemination, with emphasis on job led economic growth. Adding economic value to the time and labour of rural men and women living in poverty is the major pathway adopted for promoting sustainable lively hoods.
The name bio-village denotes human centred development where the health and happiness of rural families is the goal of development. The methods used to achieve the objectives are knowledge, skills, information and organizational empowerment of rural families.
Bio-village is a pro-poor, pro-women and pro-nature approach to economically feasible, ecologically viable and socially equitable sustainable development. It identifies various alternatives in the sustainable management of natural resources through forward-backward linkages for providing lively hood security.
Bio-village model of development focus on the following:
i. Enabling the community to understand the potentials of sustainable natural resource management and introduce various livelihood opportunities in farm and non-farm sector.
ii. Strengthening the human resource development through skill and knowledge empowerment and building grass root institutions such as self-help groups to take up the development initiatives under the framework of bio-village.
iii. Enhance the social status of rural poor by improving their skill, knowledge and fostering confidence among them to strive for social change.