bharatbook
New Member
Agriculture in India has a significant history. Today, India ranks 2 worldwide in farm output. Agriculture and allied sectors like forestry and fisheries accounted for 16.6 percent of the GDP in 2009, about 50 percent of the total workforce. The economic contribution of agriculture to India's GDP is steadily declining with the country's broad-based economic development. Still, agriculture is demographically the broadest economic sector and plays an important part in the overall socioeconomic fabric of India.
Agriculture Market of India
The rural credit market appears to be confronted with a paradox. The informal sources of finance, be they local money lenders, landlords, traders, etc. Charge more than 20% rate of interest, often keep the land as collateral against loan, and still have a very high recovery rate. On the other hand, rural financial institutions (RFIs) charge almost half of this interest rate, do not take land as collateral for most of the crop loans, and still face high defaults. Therefore, it is queer to find out what stands in the way of fast mobilization of formal credit in the rural areas. Several Committees and Task Forces have identified major inhibiting factors to be increasing the incidence of overdose or non-performing assets (NPAs) in the rural credit system, high transaction costs, regulated interest rates, inability of the financial institutions to cater to the changing demands of the agricultural sector, inherent limitations of the RFIs in inequitable distribution of loans and limited reach. The net outcome is that while informal finance still holds a prominent place in rural finance, the RFIs, especially, cooperatives are heading towards a state of financial unsustainability. It is, thus, recommended that the RFIs should be strengthened so as to accelerate the flow of credit to meet the credit demands of the agricultural market and enhance overall development of the rural economy.
Agriculture Market of India
The rural credit market appears to be confronted with a paradox. The informal sources of finance, be they local money lenders, landlords, traders, etc. Charge more than 20% rate of interest, often keep the land as collateral against loan, and still have a very high recovery rate. On the other hand, rural financial institutions (RFIs) charge almost half of this interest rate, do not take land as collateral for most of the crop loans, and still face high defaults. Therefore, it is queer to find out what stands in the way of fast mobilization of formal credit in the rural areas. Several Committees and Task Forces have identified major inhibiting factors to be increasing the incidence of overdose or non-performing assets (NPAs) in the rural credit system, high transaction costs, regulated interest rates, inability of the financial institutions to cater to the changing demands of the agricultural sector, inherent limitations of the RFIs in inequitable distribution of loans and limited reach. The net outcome is that while informal finance still holds a prominent place in rural finance, the RFIs, especially, cooperatives are heading towards a state of financial unsustainability. It is, thus, recommended that the RFIs should be strengthened so as to accelerate the flow of credit to meet the credit demands of the agricultural market and enhance overall development of the rural economy.