Only 50% of total farmer households in India are under agricultural credit net (includes both formal and informal sources of credit), informs a National Sample Survey Organisation (NSSO) report. Out of the 89.35 million farmer households, 43.42 million households are under debt. The report says that the most important source of loan in terms of percentage of outstanding loan amount is banks (36%) followed by moneylenders (26%) and co-operative societies (20%).

7% of farmers in Uttarakhand are under agricultural credit net.

This leaves a large section of small and marginal farmers out of the institutional financial system.

As expected, the flow of credit is not the same across states and regions. Below is the percentage of indebted farmers (those who took credit from both banks and money lenders) in various states of India:

Andhra Pradesh___________82%

Of the estimated 60.3 lakh farmer households in Andhra Pradesh 49.4 lakh households are indebted.

Tamil Nadu_______________74.5%

Tamil Nadu out of 38.8 lakh households, 28.9 lakh are under debt.

Punjab___________________65.4%
Kerala____________________64.4%
Karnataka_________________61.6%

Below are the states of India with lowest debts:

Uttaranchal______________7.2%
Arunachal Pradesh__________5.2%
Meghalaya___________4.1%

An Analysis:

The situation of agricultural credit net in the country needs to be seen from an apolitical viewpoint; as it’s always not bad, if farmers doesn’t take credit. As, any person takes credit only when he can make gain out of it. Credit for non-productive purposes by farming households, like marriage etc. can never be seen as proper farming credits; as the farmer in most cases, will not be able to repay it.

The states, where farmers are most dependent on credit, are either the ones with advanced infrastructure for agriculture, like canals, greater access to physical infrastructure, closeness and better connectivity to urban centres etc. are at place OR are the ones, where micro-credit initiatives have successfully been run for smaller or marginal farmers. That apart, the farming credit is a success, in those regions as well where agriculture is productive compared to other regions. If a region deals in commercial agriculture or cash crops, it has credit prevalence too. Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Punjab have one or all of these factors at play.

In hilly states, like Uttarakhand, courtesy extremely small size of land holdings, which are low at productivity, the most of the agriculture (household-wise) is sustenance agriculture – wherein, a family cultivates for their own consumption. Since the crop is always inadequate; people have to supplement it with other employment. For instance, farming households in Uttarakhand supplement their incomes with jobs in Armed forces or in unorganized sector. In simple, if agriculture is not seen as a profitable venture by Uttarakhand people, then farming credit (both productive and non-productive) will not be availed. I’m sure, even the 7.2 percent figure, would have come from Tarai, Haridwar and Dehradun regions of Uttarakhand, where most of agriculture is commercial and land holdings are relatively bigger.

What the Government at Centre Plans:

The Government is pushing for credit coverage for the entire farming community, so that even those small farmers, who now have to resort to informal lenders by furnishing some asset as collateral, could have access to the current system of institutional credit (banks). The idea is to save them from non-farmer friendly practices, delays in credit delivery and collateral problems.

To accomplish this, the Government plans to increase the banking penetration in remote areas, to those areas where farmers specially small and marginal, are largely dependent on moneylenders for credit against collaterals.

Some Numbers:

The Central Government aims to increasing institutional agricultural credit flow for reducing dependence of farmers on non-institutional sources of credit. This is the current scenario:
The credit flow has increased from Rs 86,981 crore in 2003-04 to more than Rs 4.75 lakh crore in 2011-12. According to a recent report on the State of Agriculture, as percentage of agricultural GDP, institutional credit to agriculture has increased from 2.56% in 1970-71 to 7.11% in 1980-81 to 11.47% in 2000-01 , and 32.21% in 2010-11 .
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