India is the home to a remarkable 8% of the world’s recorded flora and fauna with only 2.4% of the world’s total land area. The nation’s landscape hosts a vast and variety of agro-ecological diversity, ranging from humid and dry tropical in the south to temperate alpine climates in the north. This inherent natural wealth has made agriculture beyond livelihood, making it a way of life. It is, therefore, not astonishing to notice that ~70% of the nation’s populace is intertwined with agriculture and its allied sectors. This underscores the organic evolution of agriculture, transforming it from a mere profession into an integral part of our natural response to the environment.
While agriculture currently contributes 18.3 % to the GDP (GVA as % of total economy at current prices), this percentage is diminishing due to multiple reasons. Concurrently, the rate of urbanisation increased by 3.3% in the last decade and is expected to increase further too. This provides an opportunity for the entire agriculture sector to rapidly scale up production despite its own challenges, thereby contributing to the sectoral GDP. The agriculture sector becomes indispensable in meeting the escalating food demand too. This signifies and reiterates the need to pivot from subsistence farming to a more commercial approach, to increase food production and sustain food security. Critically speaking, this agricultural transformation is poised to address the mounting global and local demands.
The primary obstacle facing numerous dedicated efforts aimed at agricultural advancement, particularly for the average Indian farmer with a modest landholding of 1.08 hectares, is the persistent lack of capital. Agriculture commodity prices exhibit volatility and unpredictability, and the returns generated are often insufficient to independently finance the adoption of new technologies. Furthermore, any investment in fixed assets entails its own breakeven time, while farming activities necessitate continuous expenditure on seeds, fertilizers, manure, machinery rentals, and labor. Despite commendable contributions from governments and other stakeholders in providing technology, inputs, and diversification opportunities, the agricultural sector struggles to gain substantial traction on the ground. To surmount this challenge and catalyze progress, there is a crucial need to enhance credit linkage to farmers, enabling them to seize the multitude of opportunities for advancement.
Boosting the agricultural sector's performance requires the establishment of strong credit links for the majority of rural contributors to the economy. The government has put its foot in trying to solve the gap in credit delivery through various initiatives. Some of them are listed below
Despite ongoing efforts and initiatives, certain factors consistently impede these endeavours, resulting in limited success in implementing credit-linked schemes and policy initiatives. These challenges can be broadly categorized into two main groups.
Issues classified as structural problems necessitate more extensive policy changes and improved information symmetry. These problems have a larger impact at the macro level, affecting the overall efficiency and effectiveness of credit delivery systems. Tackling these structural challenges requires a comprehensive approach that can address systemic issues and promote equitable access to credit. This involves measures to enhance financial inclusion, ensure fair lending practices, and foster a more transparent and responsive financial ecosystem. By addressing these fundamental issues, the agricultural sector can receive the necessary financial support to thrive and contribute significantly to the nation's economy. Some of the key structural problems are mentioned below
As explained earlier, addressing structural challenges requires sustained and focused initiatives over extended durations. Guided by GDi’s commitment to constructing systems and adopting a systemic thinking approach, we have developed a supportive framework that can facilitate improvements in the broader credit landscape through essential policy adjustments and structural reforms
In order to inculcate a degree of shared accountability with external stakeholders like financial institutions and the UT, a decentralised conflict resolution mechanism has been designed. This would enable applicants to reach out to nominated District Resource Persons (DRPs) at any point of time to resolve and escalate conflicts that arise in the process of availing credit.
While the UTLBC (Union Territory Lending Banks Committee) oversees lending in the Union Territory across all sectors, there is a pressing need to specifically address credit linkages in the agriculture sector on a more regular basis. Policy changes require thorough deliberations and discussions, with input from grassroots levels. Therefore, establishing a dedicated committee to oversee agricultural lending—monitoring scheme penetration, addressing disputes at the ground level, evaluating government and bank initiatives to enhance credit penetration, and devising strategies to improve credit delivery—is essential. GDi has designed the structure and working principles of a UT level committee and a sub-committee at the district level consisting of representatives from financial institutions and government’s Agriculture Production Department. This committee would serve as the implementation and strategy arm of the UTLBC, with a sole focus on the agriculture sector.
Functional issues are micro in nature and have impact in the short term. Though the issues pertain to individual level, the magnitude of the problem directly affect the masses across geographies. Few examples of functional issues affecting credit delivery are mentioned below
In order to effectively address the structural issues and create impact at pace and scale, various initiatives have been designed by GDi in the UT of Jammu and Kashmir. Below is a summary of the designed interventions and the specific issues targeted.
A district-specific awareness campaign aimed at informing and educating the farming community has been designed. This campaign will have a primary focus on enlightening farmers about the diverse range of schemes available, their eligibility requirements, essential documentation, and the different activities they can undertake under these schemes. Rather than applying a one-size-fits-all approach, we will tailor the campaign to each district, using data such as crop types, farmer demographics, and district characteristics to prioritise and recommend the most suitable scheme for the district.
To counter the absence of a centralised data and data-oriented review system, a data management unit will be established and insights will be made available on public forum. This will eliminate arbitrary and subjective approaches in reviewing the different schemes and the penetration of such schemes. The data management unit will use a tech-based platform to publish insights and also aid in tracking the applications at a fixed frequency providing options to resource personnel on ground to provide updates on the progress of the application to the beneficiaries.
To address the inconsistencies in the DPR submitted during application, we have devised a standard format that could help applicants with lower levels of literacy to generate a standard DPR for their credit proposal. This initiative was undertaken with the aid of J&K Bank and the lead bank department of the UT. Key components like financial viability, cash flow projection, balance sheet, etc have been automated providing the users with ease of access and eliminating the dependence on external agents to create a DPR.
Informal credit and Credit-Commodity linkage (where farmers pledge future agricultural produce to obtain short-term credit from middlemen) have been long standing practices. However, the farming community has come to realise the drawbacks of such informal arrangements after years of exploitation.
GDi team’s recent field visit to Rajouri district shows the bright side of the picture. Mr. Atul Sharma, a progressive farmer and a beneficiary of J&K Government’s flagship Holistic Agriculture Development Programme, despite facing scepticism from his village due to the unconventional nature of his plan, aspires to cultivate strawberries on his 2 kanal land. Undeterred by traditional practices, he successfully piloted this venture and is now gearing up for the next crop season with optimism about tapping into the supply market gap. Our hope is that such interventions inspire more farmers in the Union Territory to set higher aspirations and pursue them with the support of credit linkage.
The advent of digital transformation in banking systems and the increased accessibility of financial services have alleviated the concerns of farmers. Despite this positive shift, certain obstacles remain on the path to achieving the desired outcomes which we aim to solve through our strategic interventions. The government's dedicated efforts to bring financial schemes to the doorsteps of the farming community, coupled with our initiatives to bridge gaps in the Union Territory of Jammu and Kashmir, signify progress. The revolution in credit linkage and access to credit services is poised to transform the agricultural sector, and we remain committed to facilitating this positive change.
