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LATEST NEWS UPDATES | More Credit for Agricultural Households?: NSSO’s 70th Round on Indebtedness -Sher Singh Sangwan

More Credit for Agricultural Households?: NSSO’s 70th Round on Indebtedness -Sher Singh Sangwan

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published Published on Apr 21, 2015   modified Modified on Apr 21, 2015
-Economic and Political Weekly

An increase in indebtedness in agriculture between 2003 and 2013 does not necessarily mean a growth in debt that has debilitated the cultivator. Higher indebtedness may also reflect a more enabling process--the increased availability of institutional credit. An analysis of NSSO data.

Sher Singh Sangwan (drsangwan8@gmail.com) is at the Centre for Research in Rural and Industrial Development, Chandigarh.

The National Sample Survey Office (NSSO) report, Situation Assessment of Agricultural Households (AHHs) (70th round), conducted during January–December 2013 was a repeat survey of the 59th round of 2003 (kharif and rabi seasons). The NSSO’s 70th round, published in December 2014, shows that the percentage of indebted AHHs in Punjab have declined as compared to the 59th round. Though, in India as a whole, the percentage of indebted AHHs has increased to 51.9% in 2013 from 48.6% in 2003.

Among the states, Andhra Pradesh has the highest percentage of indebted AHHs at 93% followed by Telangana (90%), three other southern states range from 77% to 83%, Rajasthan (62%), Odisha (58%), Maharashtra (57%) and Punjab at 53%. Many states have recorded increases in indebtedness by about 10 percentage points or more—Odisha (48% to 58%), Bihar (33% to 43%) and Rajasthan (50% to 62%)—while Punjab, Haryana and Gujarat show a decrease in indebtedness by about 10 percentage points or more. The indebtedness of AHHs in Punjab with the highest agricultural productivity has decreased from 65.4% in 2003 to 53.2% in 2013. Thus, in terms of indebtedness, Punjab’s farmers have slipped to ninth place in 2013 compared to their third place in 2003.

To explain the above changes, let us examine a few definitions used in NSSO’s 70th round.

Increased Access to Credit

First, the NSSO has estimated AHHs with outstanding loans in its 70th as well as earlier rounds. Outstanding loans are inadvertently interpreted as indebtedness by most academicians, though all outstanding loans may not necessarily have a negative connotation as indicated by the term indebtedness. As per banking postulates, the availability of loans to persons/households depends upon creditworthiness and the suitable loan products available from banks.

As per the NSSO data, the average share of institutional loans was 60% for all farm sizes at the all-India level, but it was as low as 15% in size classes of less than 0.1 hectare and as high as 79% for the AHHs belonging to the highest size class of land possessed (more than 10 hectares). It indicates that loans outstanding may not be interpreted as indebtedness. The farmers with bigger landholdings and higher levels of irrigation will get not only higher shares of institutional loans but also from non-institutional sources as well, if the need arises (Sangwan and Gagandeep 2014).

Second, states like Punjab and Haryana have always been ahead in availing institutional credit due to the creditworthiness of their farmers. To illustrate, as on 30 June 2004, farmers of Punjab, Haryana and Gujarat had availed 13.41 lakh, 14.64 lakh, and 16.25 lakh Kisan Credit Cards (KCCs) respectively, covering almost all landholdings. Whereas in India as whole, a total of 392 lakh KCCs were issued up to that point of time, covering less than one-third of the holdings (Indiastat nd). Hence, it is clear that the peak of availing institutional credit in Punjab, Haryana and Gujarat may have been reached ahead of other states in India.

Therefore, the decline in the percentage of AHHs with outstanding loans may be a logical outcome in these states. Whereas, in other states the popular crop loan scheme of KCCs has been vigorously implemented from 2003 to 2013. Besides, a number of other centrally-sponsored credit-linked subsidy schemes were also implemented during this period. The central government policy of “doubling agricultural credit” during 2004–07 and the focus of the Reserve Bank of India (RBI) on financial inclusion since 2006 may have covered more of the excluded regions with predominance of small and marginal farmers. Owing to these efforts, there was more than a threefold increase in the number of KCCs in India (about 1,300 lakh) as on March 2013 over June 2004.

Among the states, during this period, the number KCCs increased more than fourfold in Bihar, and more than threefold in Odisha, Andhra Pradesh (united), and Rajasthan. While the number of KCCs just doubled in Punjab, Haryana and Gujarat. The southern states continue to be ahead in availing loans not only under KCCs but also microfinance through self-help groups. The credit deposit ratio of southern states in general is higher than the all-India level and because of that their percentage of AHHs with outstanding loans is much higher, ranging from 77% to 93%. This establishes that the percentage of AHHs with outstanding loans may be correctly interpreted as access to credit instead of indebtedness.

Changed Definitions

Third, in NSSO’s 59th round, possession of land was an essential condition for a “farmer household,” but in the 70th round, this term has been replaced by an “agricultural household,” which may or may not possess land but at least one of its members may be self-employed in agriculture, having total value of produce of more than Rs 3,000 during the last 365 days. Hence, AHHs in the 59th and 70th are not strictly comparable, but the implications of changes in definition are very limited. Landless agricultural households were just about 1% of the total estimated AHHs in the 70th round. Even the estimated 90.2 million households (all-India) in 2013 are almost equal to the 89.4 million in 2003.

Among the states, there are perceptible changes in the number of AHHs. Assam, Karnataka, Maharashtra, Odisha, Rajasthan, and Uttar Pradesh have recorded increases in their number of AHHs, while Punjab, Haryana, Kerala, Tamil Nadu, and West Bengal have recorded decreases in number of AHHs. Punjab and Haryana are states where the number of AHHs has decreased much more than others. To illustrate, the number of AHHs in Punjab and Haryana decreased to about 14 lakh and 16 lakh, respectively, in 70th round from about 18 lakh and 19 lakh in the 59th round. In both of these states, the percentage of AHHs with outstanding loans has also decreased more than 10 percentage points. Notwithstanding, the average amount of loan outstanding per AHHs may be higher in Punjab than other states.

The average amount of loan outstanding per AHHs in Punjab was Rs 1,19,500 in 2013 as compared to Rs 41,567 in 2003 with an increase of about 287%. As compared to Punjab, in India as a whole, the average loan amount outstanding per AHH increased to Rs 47,000 in 2013 from Rs 12,885 in 2003, an increase of 374%. Thus the increase in average outstanding loan amount per AHHs is less in Punjab as compared to India as a whole. Moreover, the higher outstanding loan amount per AHH in Punjab may be really higher due to its large average holding size of 3.77 hectare (2010–11) with almost 100% irrigation as compared to 1.16 hectare all-India with about 47% level of irrigation. Besides, cropping patterns may also affect the loan amount per household as it is Rs 2,13,600 in Kerala which is much higher than Punjab. Moreover, the loan amount outstanding per AHHs cannot be commented upon in isolation to their income.

A sample survey of Punjab during 2012–13 (Singh et al 2014) found that the average loan amount per farm households was Rs 2.18 lakh and the average surplus per households after cost of cultivation and domestic consumption expenditure was Rs 4.64 lakh and it is regular in both kharif and rabi seasons. Hence, Punjab farmers may be regularly clearing their loan account at some point of time and if interviewed after repayment, AHHs with outstanding loans may be less. Similar may be the situation in Haryana and Gujarat, where the percentage of indebted farmers in the 70th round declined to about 42% from 53% and 52% respectively in the 59th round. It is to be noted that the 70th round surveyed farmers were visited in the second half of 2012 and first half of 2013 as compared to the visits in kharif and rabi seasons in 2003. This change in timings of survey may have excluded the farmers who paid regularly. Otherwise access of farmers to loans is about 90% in Punjab as per other sample surveys (Singh et al 2014; Sangwan 2014).

Lastly, it was observed in some studies (Sangwan 2013) that higher rent per acre from leasing out land in Punjab and Haryana may have induced many small and marginal farmers to go out of farming and they may not avail loans too, thus reducing the AHHs with outstanding loans.

References

Government of India (2014): Key Indicators of Situation of Agricultural Households in India, NSSO 70th Round (January to December 2013), Ministry of Statistics and Programme Implementation, December.

Indiastat (nd): “Kisan Credit Cards,” Indiastat.com, www.indiastat.com/agriculture/2/kisancreditcard/206866/stats.aspx

Sangwan, S S (2013): “Impact of Computerisation of Land Records and Review of Land Tenancy Reforms and Land Leasing Laws in Punjab,” NABARD sponsored study by The Centre for Research in Rural Industrial Development, Chandigarh, August.

— (2014): “Inclusive Banking-Landless Rural Families Are Still Excluded from Credit Ambit,” Daily Post, Chandigarh, 31 May.

Sangwan, S S and Gagandeep (2014): “Implementation and Impact of Financial Inclusion in the Villages of Punjab,” report of a study by SBI Chair, CRRID, Chandigarh, January.

Singh, Sukhpal, Shruti Bhogal and Randeep Singh (2014): “Magnitude and Determinants of Indebtedness among Farmers in Punjab,” Indian Journal of Agricultural Economics, Vol 69, April–June, pp 243–55.

Economic and Political Weekly, Vol-L, No. 16, April 18, 2015, http://www.epw.in/commentary/more-credit-agricultural-households.html


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