The banking community played an important part in enabling the Green Revolution. It should play such a role in ushering in the era of freedom from hunger.
At BANCON (annual bankers' conference) 2011 in Chennai, financial institutions explored avenues for greater participation in agriculture and rural development. There are a few areas in need of additional attention and investment.
Green Revolution technologies are scale-neutral but not resource-neutral. Inputs are needed for output; therefore market-purchased inputs become important in providing soil and plant healthcare for higher yields. Social scientists point out that small and marginal farmers will be excluded from the benefits of the Green Revolution since they would not have the financial resource to buy inputs. The Government of India initiated a Small and Marginal Farmers Programme specially to provide credit and other inputs. After bank nationalisation, provision of credit to small and marginal farmers got priority. Without this, the wheat revolution would not have covered all farmers. The smaller the farm, the greater is the need for marketable surplus, so that the family will have cash income to meet their needs.
The emerging phase in agriculture will be based on integrating the principles of ecology and equity in technology development and dissemination. This is the path to an ever-green revolution leading to sustained increase in productivity without associated environmental harm. In recent years, the government has stepped up credit for agriculture. However, the burden of indebtedness is still high in rural India, and the rural masses are exploited in the credit market. Much of the credit intended for farmers goes through indirect channels, and not directly to them.
Problems in the supply of credit to rural families include inadequate supply of formal credit on the whole, imperfect and fragmented rural credit markets, and unequal distribution of credit, particularly with respect to region, class, caste and gender. In spite of the dominant role played by women in both farming, they are denied credit as they lack land titles. Only a small percentage of Kisan Credit Cards goes to them. Consequently, the major source of credit to rural households, particularly income-poor working households, continues to be the informal sector. Many of the farmer suicides, particularly in the drought-prone areas, are attributed to lack of access to formal credit at reasonable interest rates.
If farmers have to take their lives, then there is something wrong in our economic and social structure. Unfortunately, this issue is being dealt with in statistical terms and not from the point of view of the real state of farming.
Financial inclusion
Apart from the initiatives taken by banks, some of which are commendable, the most important instrument to reach the unreached in terms of access to credit is microcredit. A number of non-banking finance companies have entered the rural microcredit market. Many microcredit agencies have been charging interest rates not very dissimilar to those charged by moneylenders. Borrowing then becomes more to meet pressing consumption needs, rather than for farming or small-scale enterprises. There are examples of micro-enterprises organised by women's Self-Help Groups with the help of microcredit. Production-oriented SHGs become sustainable if they have backward linkages with technology and credit and forward linkages with the market. The rationale for microcredit is to strengthen the livelihood security of the economically underprivileged sections, and its impact should be measured in terms of reduction achieved in poverty and hunger. Formal financial institutions should provide funds to non-banking finance companies only on the basis of a well-defined code of conduct that will help promote a win-win situation for the lending institution and the SHGs operating market-driven micro-enterprises.
The pervasive nature of malnutrition in India is evident from national and international surveys. International price volatility is high, both due to a continuous rise in petroleum prices, and unfavourable weather conditions. For the poor, including small and marginal farmers, food inflation increases their vulnerability to hunger. India's food inflation is now over 12 per cent. The Reserve Bank of India has raised interest rates 13 times in 19 months. They are up from 4.75 per cent in March 2010 to 8.5 per cent in October 2011. The inflation rate has been steady since March 2010, despite RBI interventions. A fresh approach is needed, going beyond merely altering interest rates to contain inflation. In measures to contain food inflation, a disaggregated approach is needed. Look at a few commodities:
• Vegetables: Prices have gone up by 63.95 per cent in the last six months. The National Horticulture Mission with an outlay of about Rs. 20,000 crore, meant to increase production of vegetables and fruits, puts emphasis on commercial vegetables, including for export, rather than on malnutrition. For every nutritional malady there is a horticultural remedy. The nutrition and food inflation containment dimensions in the Horticulture Mission should be mainstreamed. Mapping the hot-spots with reference to the gap between demand and supply and planning the production and distribution strategy will help check inflation.
• Pulses: Budget 2011 provided funds to establish 60,000 Pulses Villages. If the programme is implemented holistically, price rise can be halted. Banks can help establish Pulses Seed Villages to provide seeds, as Indian Overseas Bank did over 10 years ago in Tamil Nadu.
• Potato and onion: In a report on managing the prices of perishable commodities submitted to Indira Gandhi in 1982, a detailed strategy for the management of output and prices in the case of crops such as onion and potato was dealt with. The approach suggested was similar to what was done in the case of milk by Dr. V. Kurien and the National Diary Development Board, where the emphasis was on post-harvest infrastructure and management. Unfortunately, the National Horticulture Board has not been able to play a similar role. It is time we developed a mechanism that can ensure remunerative prices.
• Milk: Nearly 80 per cent of the price of milk is accounted for by the cost of feed and fodder. We are exporting concentrates like the soyabean meal while we have nearly one billion farm animals to feed. Often, common grazing grounds are diverted for other uses. Seeds of good fodder varieties are not available. In areas where there are large numbers of dairy cattle, SHGs can organise fodder and feed banks with support from banks.
• Rice, wheat and nutri-cereals: Prices of these staples have remained relatively stable largely because of procurement and public distribution policies. This has a lesson for other crops: food inflation can be contained if a disaggregated commodity-centred approach based on a clear understanding of the causes for price rise is adopted.
Over 60 per cent of India's population is engaged in agriculture. Our greatest challenge is the technological upgradation of small-farm operations to improve small-farm productivity, profitability and sustainability. There is a growing gap between scientific know-how and field-level do-how. Indian Overseas Bank is helping to organise Farm Schools in the fields of outstanding farm women and men to bring those from other areas to stay for a few days with the farmer-achievers, helping multiply successes. Members of the banking family could take up such activities under their corporate social responsibility programme.
There is a need for greater credit and insurance literacy among farm families. Financial institutions interested in increasing their lending for food security could locate a staff member in Krishi Vigyan Kendras. I initiated the KVK pathway of knowledge and skill empowerment in 1974 with the first one located at Puducherry. Now there are over 500 KVKs operated by the Indian Council of Agricultural Research, agricultural universities and non-government institutions that can provide locations for financial institutions to launch a credit and insurance literacy movement.
If agriculture goes wrong, nothing else will have a chance to go right in India. With a National Food Security Bill on the anvil, we must redouble our efforts to increase farm production on an environmentally sustainable basis. The banking community played an important part in enabling the Green Revolution. It should now play such a role in ushering in the era of freedom from hunger.
(Professor M.S. Swaminathan is a Member of Parliament, Rajya Sabha, and the Chairman of the M.S. Swaminathan Research Foundation, Chennai.)
Keywords: BANCON 2011, Green Revolution, food inflation
Comments:
Dr MS Swaminathan's comment is well intentioned, meant and taken. However there is a different perspective to the title of this essay - it is now common knowledge that the financial crisis of 2008-2009 was triggered by the world's biggest and best known banks, them lending money to many an unqualified well heeled individual/institution. Inspite of the financial institutions employing some of the best brains from Ivy League etc, they were not in a position to objectively differentiate between the truly needy and the undeserving many. In that sense education as provided by these top notch schools has failed its purpose and society at large. It is time to take a relook at this education system worldwide and make an objective determination whether all the aptitude tests,high profile projects, grading criteria etc are indeed useful and helpful to society.
While MS presents a good analysis of of the agri and hunger issues facing the nation, the headline of the article is totally inappropriate. Banks play a facilitating role in the process. It is the role of the state to make policies that will transform. Banks are only financial tools that policymakers have to leverage. To expect banks to step in and fix structural issues that are an outcome of failed policy, an inept corrupt bureaucracy and polity, and a complete lack of vision and leadership is totally missing the point and is tangential to the real issue. The article notes various issues in the system, but he talks of only one theme when it comes to banks - extending agricultural credit and loans. It seems it is Swaminathan's case that if the credit issue is solved by the banks, then the other problems inherent in the mix will automatically be solved. Wrong diagnosis, woefully simplistic prescription, and dodges the real issues completely.
National Horticultural Board could not succeed in providing post harvest infrastructure and management of potato and onion mainly because of Power Shortage. With an outlay of Rs. 20000/ crores by the Central Government for our National Horticultural Mission if only our Public Sector Banks play a dedicated role for every nutritional malady , there will be a Horticultural remedy. Farmers will get remunerative prices and vegetable inflation could also be contained. Dr. M.S. Swaminathan Research Foundation does a remarkable service to Agriculture.we have to devote more attention to Horticulture.
Needed: 1. Financial education and guidance of farmers 2. All farms must have refrigerated trucks and godowns increasing shelf life and strengthening supply chain. If the entire country is mapped for food produced and distributed, mode of transport existing and planned for movement of food - then the mode of transport - its source of power - starting from the farm right down to the homes and restaurants - can be planned in the most cost effective and environment friendly way funded by banks.
The first sentence states that “Green Revolution technologies are scale-neutral but not resource-neutral.” The last sentence of that paragraph contradicts the first sentence, “The smaller the farm, the greater is the need for marketable surplus, …” The real problem appears to be that there is too much owner/labor available on farms that are too small, and economically unviable. A time comes when the capacity of people, bullocks, and horses is not sufficient and machinery is needed. Such machinery can be used only on large farms to make them economical. Finance is not necessarily the only problem. The call to SHG’s and CSR programs implies that farming is dependent on charity and cannot be an economic activity standing on its own. It is an optimization and allocation problem and needs appropriate doctors to address the real problems.
When Life Insurance was Nationlised only one authority LIC was created. When Banks are nationalised there was no such authority was ushered. Every nationalised bank maintained its own name and individuality. After the entry of Private banks,these Nationalised banks are more interested to compete with them in adding deposits and business.Even the poor account holders do not get any dignified services from these banks.To ask them for help to eradicate poverty of the farmers is a tall request How many times the account holders are given 1000 and 500 rupee notes when they want 10 and 50 rupee notes,Sometimes even 100 rupee notes are also not given.As sonia commented on the Lokpal for looking within,we want the banks to look within their "Withdrawal counters".To ask the banks to help in eradicating the poverty of unknown account holders could prove to be a Tall order.
Most of the houses in Chennai suburbs have coconut trees and their yields go waste as there are no takers. For plucking coconuts, Rs.50 is charged for a single tree. TN government must arrange for plucking and >buying the coconuts just as it procures milk and paddy from farmers. We can not waste the agri-yields as we face hunger.
Agriculture has been and is the backbone of Indian economy. Although its contribution to GDP is shrinking continuously, it remains the linchpin in employment to 60% of Indian population and food to every-one. There are signs of improvements, reflected in data relating to credit to farm. In fact, the needy person still is away from the formal routes of credit thanks to complicated procedure, lethargy on part of banker to disburse the loan and lastly the influence of brawny farmers to grab the share of priority-sector credit for other purposes. It is crystal-clear that the current inflation is mainly caused by supply bottlenecks, otherwise 13 rates hike by RBI would have rein in the swelling problem. The sustainable solution to inflation, malnutrition and poverty lies in growth of agriculture. There is need for concerted efforts on part of governments, financial institutions, scientist, technocrat and all other stakeholders to provide much needed attention and resources to this area.
Banking sector lead a poverty in our agriculture prospective because our (80%)Indian farmer community is marginal farmer and it cannot carry higher price of fertilizer seeds and also farm implements and also cannot not use modern technique of agriculture most of farmers of India is illiterate therefore he or she not fetch good price of agriculture product and middle man and broker take benefits of this demerits of farmer also most of the bank established in urban society and our block levels and process of taking loan is very much tedious job and in this middleman and brojer are involve giving loan through bank and take commission for this work.Simultaneously in between 19 month bank increases our repo rate or reverse repo rate,SLR&CRR and inflation it leads to break the backbone of our Indian farmers.
Banks are a beacon of trust among the people. Just ask anyone around you rich or poor, they will trust banks more than politicians. I think that is why Sir MS.S. is extolling the importance of Banks and their role in farming. Why dont we see this at a height of 20,000 feet instead of putting this entirely under a magnifying glass. Truly, Banks have done incredibly to manage the economy and the money supply during the recession with the assistance of the policies of the central government. If not for the finesse and prudence of RBI India would be under worse conditions. It maybe administrative lethargy hurting the farming sector, which is not in the hands of the banks. But, the banks do have a role to play in extending financial assistance at afforadable interest rates to the marginalised farmers. One needs to instil the feeling of confidence to see the difference between thinking of killing oneself and pulling through the crisis courageously. Banks have the needed trust to use it.
Providing credit in adequate measure will help only when other inputs like seeds,water/power,extension services,assured remunerative price for the produce and storage & marketing facilities are made available at the right time. Otherwise, mere provision of credit does not yield results. A holistic approach is therefore needed. are available
Congratulations to Dr Swaminathan on this essay. Thankfully it was
addressed to bankers who urgently needed a 'back to basics'
recapitulation about the Indian agriculture. He has rightly put to
rest by demystifying the "protein inflation" bogey, an artifact
bearing a distinct RBI stamp.
However what he sorely missed was a ruthless reminder to the Bankers
that Food credit growth does not have to be shrouded into priority
sector lending. Bankers should introspect their role in manufactured
food product inflation for the past 18 months. The elevated and
escalating levels of so called protein inflation are all processed
products that has a heavy share of corporate' financial and
manufacturing resources. The corporate did demonstrate deceleration in
bank credit but buoyant appetite non-banking and external sources
particularly FDI and ECBs. Hence recommendation of bankers for supply
side management is grossly misplaced. Bankers are responsible for the
current food inflation.
While reading these article and the role of Banking community in the agricultural sector,Mr.P.Sainath's comments came to my mind.Once he said:"For the last 15 years,Our farmers are compelled to commit suicide because Banks can not extend a meager loan of Rs. 8000 and when I come back to my native place,Banks offer me loans for Buying Mercedes at a very low interest rates and also no collateral required.What kind of social justice is this!" We as an Indian society have left poor farmers to the mercy of Informal money lenders.They charge interest rates at unimaginable interest rates and that is where the banking community with the help of social groups has to play a major role.But hold on,Banks in the era of Profit and Capitalist driven ideology can not be philanthropic.Now in these circumstances the role of major player such as Govt. between these two loose ends is paramount and hence more inclusive framework of policy making needs to be formulated in an accountable and authoritarian way.
The health of agriculture seen now is due to green revolution technology. Air is polluted, water is polluted, soil is polluted and food is polluted. This is not going to solve the future agriculture of small farmers. To get household security, one must move to our traditional agriculture system in which animal husbandry play the vital role. Green revolution chemical inputs mono crop agriculture system killed the animal husbandry component. The government and scientists must look in to alternate pollution free & low cost input technology and not loan melas -- organic, progressive farmers innovations under cooperative farming -- see my book at www.scribd.com -- Green Revolution.
The article on ‘Banks Should Lead the War on Poverty’ By M. S. Swaminathan (The Hindu, 10-11-2011) is thought provoking. He has rightly mentioned ‘There is a need for greater credit and insurance literacy among farm families’. With 80 percent marginal and small holding size attention is required more to develop them and for this separate approach is required. Initiative taken by SKDRDP, Karnataka (an NGO) for the development of marginal and small farmers is an ideal model in this regard. By forming 5- 8 marginal and small farmers having contiguous land in the same village with proper guidance vis-a-vis extending credit to them, economic condition of marginal and small farmers has improved to a great extent. As it has been proved fruitful so such model may be adopted in other parts of the country keeping social and cultural issues.
Guess what is required is that the govt understands that its not the corporations which gets the country going.It has to make sure that indeed banks are providing the mandatory services to the farmers. Today a natioinalised bank is supposed to give a certain % of agricultural loans. Yes its true in paper as it was issued to the managers friends & family in the name of farmers. So we need systems that dosent go around things but does the things as envisaged.
the article is indeed full of brilliant ideas and not just bankers, but every stakeholder in agriculture needs serious introspection. however, i feel there is a need to widen the scope of the context in which the problems and possible means for resolutions are suggested. for instances, in areas affected by armed conflict in the red corridor region and north-east india it might be extremely difficult if not impossible, to cater to the needs of the framers through the channels of banks be it private or nationalised. here private moneylenders play very crucial role though they are not viable for the long term success of the farmers. perhaps a system might be adopted by the banks with the help of the respective government of the conflict ridden States. rather than providing loan in cash the banks may in collaboration with the agricultural department of the States identify those farmers who are in need of support and the help may be extended. this may be done with the help of Panchayats.
The great icon of India's agri scenario M S Swaminathan's article is full of information and suggestions to overcome the greatest malady our nation is suffering from. Many of his suggested approaches are brilliant. However ,what this country needs is revolutionary approach to cure the malady. In this context, the approach mentioned in the book ' 5 Years Guarantee : How to make India Richer " is an approach and action plans for total removal of poverty within 5 years. At present, it is not the production short fall but it the distribution afflicting the maximum damage. And there is no other better method of distribution than universally low prices of food items to the final consumers.As the book argues, it is feasible to do so in this great country. Just remove all subsidies except on food and agriculture,ban exports of food items/inputs going into food production and abolish future trading of agri commodities. Free economy for all other products.Plant fruit trees in non agri land.