Agriculture finance and government initiatives in escalating viable financial services to the sector

Agriculture is back bone of Indian economy which provides employment and livelihood to a large section of the Indian population. As per ILO estimate of 2018, approximately 44% of the working population is employed in the agriculture and allied sector. The vast farming area, diverse agriculture and a large population dependent on agriculture and also important initiatives taken by the Government of India from time to time has propelled India to the world’s center stage as a big consumer market and also as a key supplier of food products. India is now among the highest-ranking countries in production volume for various commodities like rice, cotton, dairy, fruits, vegetables, meat, and seafood. The Indian agriculture sector has not only become self-sufficient but has emerged as a net exporter of several commodities like rice, marine products, cotton, etc.  However, the contribution of agriculture to the GDP of India has been steadily declining over the years. In terms of data available from the Ministry of Statistics and Programme Implementation (MoSPI), the contribution of Agriculture to India’s GDP is below 20% from 2010 onwards compared to 52% in the 1950s. Further, the share of Agriculture & Allied Gross Value Added (GVA) in overall GVA (gross value added) was 16% (as per the Ministry of Agriculture and Farmers’ Welfare (MoA&FW) Annual Report 2018-19).

Small and marginal farmers:

The small and marginal farmers account for 86 percent of all holdings and 47 percent of the operated area. The category of small farmers farming with an average landholding size of 1.08 hectares and contribute over 50% of the total agricultural and allied output. The Economic Survey 2018-19 submits that the growth rate in GVA (at 2011-12 prices) over the past five-six years has been higher for livestock, fishing, and aquaculture as compared to crops.  Allied activities contribute approximately 40% to agricultural output, whereas only 6-7% of agricultural credit flows towards allied activities.

Government Initiatives in developing sustainable development goals (SDG):

The government of India has taken many important initiatives from time to time like;

• Pradhan Mantri Krishi Sinchai Yojana (PMKSY)
• Kisan Credit Card (KCC) scheme for farmers
• Kisan Credit Card (KCC) Scheme for Animal Husbandry and Fisheries
• Interest Subvention Scheme for Kisan Credit Card (KCC) to Fisheries and Animal Husbandry farmers
• Interest subvention scheme for short-term Crop loans
• Pradhan Mantri Fasal Bima Yojana (PMFBY)
• Soil health card (SHC)
• National Agriculture Market Scheme (e-NAM)

In addition to the above schemes, Reserve Bank of India vide its circular RBI/2018-19/118 FIDD.CO.FSD.BC.No.13/05.05.010/2018-19 dated February 7, 2019, advised all the scheduled commercial banks (including RRB/SFC) to raise the limit for collateral-free agriculture loans from the existing level of Rs.1 lakh to Rs.1.60 lakh. Banks may also waive the margin requirements for agricultural loans up to Rs.1.60 lakh.Farmers are also eligible for a long term credit limit for pump sets, sprayers, dairy animals,etc.

Direct and indirect finance:

At present, 18 percent of ANBC is reserved for agriculture advance which includes 13.5% for direct and 4.5% to indirect finances. The loans made to individual farmers, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of individual farmers are examples of direct finance. Direct finance includes allied activities such as dairy, fishery, piggery, poultry, bee-keeping, etc. Indirect finances for agriculture are solely linked to agricultural activities or those who extend credits to farmers.

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