Follow up on the findings
A call to action on the issues highlighted by NABARD.
I quote from an insight of this column shared with the readers last week "…another fact which comes out of this study (India Bangladesh Border trade in agriculture) is that almost every farmer – marginal or small - is not dependent on agricultural incomes alone for sustenance. Some member of the immediate family is employed elsewhere – either in a job or seasonal work and some even migrate for short or long intervals. This could be looked at in two ways – the sceptics would argue that agriculture is losing out in terms of trade, and is no longer a viable economic proposition. The counter-factual is equally significant: finally, we are at the stage when less than fifty per cent of rural incomes will come from core agriculture, and this in itself, is a significant marker of economic development (Millennium Post, Monday, August 13)
This statement has found empirical validation in the report of the National Bank for Agriculture and Rural Development's (NABARD) All India Rural Financial Inclusion Survey (NAIF) released last week in New Delhi. The transition, from the anecdotal to the domain of empirical, is significant for policy making especially for the committee on Doubling Farmers' Incomes as it is becoming increasingly clear that the focus will have to be on 'value addition', 'farm-related services', 'near –farm jobs' as well as better coordination between development interventions across all the agriculture and allied sectors including rural employment, self-help group, and related schemes. The report makes it abundantly clear that neither farmers nor agriculture workers are putting all their eggs in the same basket – and the propensity for taking up work to add to the agriculture incomes is well established. Thus, on an average, even the agricultural households are not getting more than 35 per cent of their incomes from farm production and when all households are taken together, the income is less than 23 per cent of the total income. As such we will have to make a distinction between doubling farmers' incomes and doubling income from farming: the latter is perhaps more in the domain of what's achievable. Here again, the two big challenges: crop failures and market failures have made farm incomes a highly volatile variable in contrast to other sources of incomes – viz wages, salary, and income from the non-farm sector (12 per cent). Every farmer in the survey had been affected either by crop failure on account of natural calamity, pest/insect infestation, and/or a sudden fall in prices after a bumper harvest. Thus, the increase in monetisation of agriculture has also made it less attractive to farmers as compared to other options.
The other findings of the report also have major implications for policy. The fact that 88 per cent of farmers have a bank account is a very positive sign. It means that financial inclusion for farmers is eminently possible: we now have to work on making the Kisan Credit card a powerful instrument to look not just at credit – but also as a mechanism for addressing crop failures (through farm insurance) and market failures (through warehousing receipts, procurement options, and forward trading). However, the coverage of agriculture insurance is a cause for alarm, for, among the agricultural households which have taken an agriculture loan from an institutional agency, only 6.9 per cent have reported compliance. And in the case of livestock, including milch cattle, the coverage is as low as 1.7 per cent. Given the large network of milk cooperatives in the country, this figure sounds a very discordant note and calls for an in-depth study.
On the positive side the Self Help Groups have found wide acceptance and if the figure of 95 per cent saving of farm families with institutional sources is true, then we have a reason to feel confident. The report tells us that over 10 per cent of farmers were making investments (farm equipment, irrigation, cattle) but over 40 per cent were borrowing for operational expenses (seeds, fertilizers). The bulk of this - over 60 per cent - came from institutional sources, 30 per cent from informal sources, and another 10 per cent from both. This also means that there are many more households who have a bank account or a Kisan Credit card but are not using this instrument. This needs to be investigated and your columnist had tried to address this issue during the Bangla Financial Inclusion Fortnights over the last two years. However, it is also becoming clear that the presence of institutional sources of funds acts as a kind or 'pro-competitive' presence, thereby reducing the rates of the transaction in the informal market and one has to acknowledge that with respect to time, the transactions in the informal market are much quicker than the formal system.
In totality, it's a job well done – but this has to be followed up by state-specific reports and analysis because this is where the action has to take place. Knowing that at the All India level over 12 per cent farmer families has 'leased-in-land' is good but a state-specific breakup would help the states, where the incidence is higher, to go in for land leasing laws. We also need a study on the extent of land which is not under plough because of the reluctance of owners to lease out the land on account of 'fear' that if the land is leased out, and the cultivator claims tenancy rights, the original owner may lose all rights to land. Perhaps NABARD can ask the Lead Bank in each state to produce a similar report, which takes a closer look at all the issues that this report has raised, and then hold an in-depth discussion on the way forward.
(The author is Director General, ATI & Additional Chief Secretary, Government of West Bengal. The views expressed are strictly personal)