An overview on Agricultural credit in India: Status, issues and future agenda
Hanumanthappa H.
Department of Economics, Government First Grade College, Bapuji Nagara, Shivamogga - 577201 India
ABSTRACT
Status, issues and future agenda of Agricultural Credit in India is reviewed based on published literature as worked out by various researchers. Agricultural credit has a vital role in supporting agricultural production in India. The Green Revolution was marked by increased use of inputs such as fertilizers, seeds and other raw materials, which in turn increased the need for loans from agricultural financial institutions. Though the scope and scale of agricultural credit has expanded over the years, several weaknesses have emerged that affect the viability and sustainability of these schemes. Moreover, outdated legal frameworks and outdated tenancy laws have hindered the flow of credit and the development of strong and efficient agricultural credit institutions. What has happened in this short history of agricultural credit? First, after nearly70 years of sustained efforts, institutional credit has indeed reached a significant proportion of farmers. As the share of agricultural GDP in total GDP declines, the share of agricultural credit in total credit is expected to decline as well. However, we must ensure that this share of agriculture in GDP does not decline and actually increases. Banks need to better analyze where the risks lie in granting agricultural credit and find market-oriented solutions to mitigate these risks. There is an urgent need to introduce the best modern techniques for risk management in agriculture, including a clearer separation between high- risk and low-risk borrowers. Banks need to take a more specialised approach across different agricultural sectors and regions to disaggregate and better understand agricultural credit needs and risks. That is, which sectors and regions are credit-worthy and which are not? Which agricultural activities and regions are being assessed more and why? A “business as usual” blanket approach is no longer sufficient. Sixth, the need for secondary activities and longer-term credit is on the rise, changing traditional views of what constitutes agriculture and how it should be promoted. A review of agricultural credit performance in India reveals that while the overall flow of institutional credit has increased over the years, there are several gaps in the system such as: B. Inadequate credit supply to small and marginal farmers, shortage of medium to long term credit, limited deposit mobilisation and high dependency of large agricultural finance institutions on borrowed funds. These have a significant impact on agricultural development and the well being of the farming community. Hence, efforts are needed to address and resolve these issues.