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LATEST NEWS UPDATES | Most small farmers outside formal credit system. Sitharaman’s announcements won’t help them -Shoumitro Chatterjee and Mekhala Krishnamurthy

Most small farmers outside formal credit system. Sitharaman’s announcements won’t help them -Shoumitro Chatterjee and Mekhala Krishnamurthy

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published Published on May 15, 2020   modified Modified on May 17, 2020

-ThePrint.in

An RBI report says that despite numerous existing initiatives, at most 40 per cent of India’s small and marginal farmers are covered by formal credit.

There is no doubt that agricultural credit is a critical element of both agricultural production and marketing across India. However, during a period of acute crisis, the government needs to bank on channels that are relatively robust and far-reaching. Unfortunately, especially when it comes to small and marginal farmers, the current channel of choice—the formal system for agricultural credit in India—falls well short.

The second set of announcements unveiled by finance minister Nirmala Sitharaman Thursday under the Narendra Modi government’s atmanirbhar Bharat push focused on directing food and financial assistance to migrants, small farmers, small vendors, and the self-employed.  At this critical juncture in the agricultural season, the focus on small and marginal farmers should be welcomed. But we are now operating within a brave new economic vision and rationale, where laws act as the fourth factor of production and loans are the primary lifeline against widespread distress and declining demand. So, those who cultivate the land, and labour for a living, must now put their faith in credit.

Low coverage means limited access to credit

Let us consider the two measures that the government has announced.

The first is the sanction of Rs 30,000 crore additional emergency working capital funding for farmers through the National Bank for Agriculture and Rural Development (Nabard) to be targeted at rural co-operative banks and regional rural banks. However, we know that priority sector lending to small and marginal farmers —the focus of this relief package—is very limited. In its 2019 report, the Reserve Bank’s Internal Working Group to Review Agricultural Credit estimated that despite numerous existing initiatives, at most, only 40 per cent of India’s small and marginal farmers are covered by formal credit.

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ThePrint.in, 15 May, 2020, https://theprint.in/opinion/most-small-farmers-outside-formal-credit-system-sitharamans-announcements-wont-help-them/422551/


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