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AGRI-CREDIT & FARMER’S SUICIDES
Agricredit is an important mediating input for agriculture to improve productivity. Access to institutional credit enables the farmer to enhance productivity by investing in machinery and purchase of variable inputs like fertilizers, quality seeds, and manure and providing funds till the farmer receives payment from sale of produce, which is at times delayed and staggered. Input use by farmers is sensitive to credit flows to the agriculture sector. Some of the concerns regarding agri-credit are as given below.
(i) Predominance of informal sources of credit: farmers still avail as much as 40 per cent of the funds from informal sources – 26 per cent of the total agricultural credit flow from the local money lenders (highly exploitative lenders).46 In respect of high interest rates, DBT may be considered to replace subvention of interest rates. The intermediation and refinance model to promote agricultural credit needs to be revisited and replaced with DBT that shall subsidise the interest paid by the farmer, instead of subsidising refinance to financial institutions.
(ii) The ratio of agricultural credit to agricultural GDP has increased from 10 per cent in 1999–2000 to around 40 per cent by 2015–16. However, the share of long-term credit (for more than 5 years) in agriculture or investment credit has declined from 55 per cent in 2006–07 to 37 per cent in 2015–16. The decline in the share of long-term credit in agriculture needs to be arrested and reversed.
(iii) There is regional disparity in the distribution of agricultural credit. The coverage is very low in the north-eastern and eastern regions of the country.
(iv) Crop Loans being short-term (for less than 15 months) in nature are meant to meet the current expenditure till the crop is harvested fail to promote major investments in agriculture. Farm loans upto Rs. 3 lakh are disbursed at an interest rate of 7 per cent per annum (effective interest rate becomes 4 per cent after 3 per cent interest subvention). For the fiscal 2017-18, farm credit has been increased by the Union Budget 2017-18 to Rs. 10 lakh crore (which was Rs. 9 lakh crore for the year 2016-17, as per the Economic Survey 2016-17 ).
Bankruptcy and indebtedness have been cited as a major cause for farmer’s suicides (around 37 per cent of all suicides by the farmers) in the country in which local money-lenders were usually portrayed as the villain. But as per the latest NCRB (National Crime Records Bureau) data, 80 per cent of the farmers who committed suicides in 2015 due to ‘bankruptcy or debts’ had borrowed money from institutional sources (banks and registered microfinance institutions). Besides, the country has seen a threefold increase in the famers’ suicide due to bankruptcy and indebtedness (from 1163 of 2014 to 3097 in 2015). In 2015, a total of 8007 farmers committed suicides due to various reasons. It was for the first time that the NCRB categorised farmers’ suicides due to debt or bankruptcy based on the source of loans.
Looking at the current scenario only the size of fund allocated by the government for agriculture credit does not look sufficient. India needs to strengthen other support systems also related to enhancing the farm income together with expanding the agriculture insurance in a speedy manner.