Rural Financing: Saviour of Economic Slowdown
India is going through a slowdown in growth trajectory. The International rating agency has downgraded the country rating. The growth projections are slowing down in each quarter. The corporates are not investing; credit offtake is very low. There is high level of unemployment. Combined, all these are resulting in a slowing down of the consumption demand in the economy. Many economists and policy makers have opined that in a country of 1.3 billion population, where more than 65 per cent remain in the rural areas, direct cash transfers to the rural economy can boost the demand. Now coming to how do we provide more money in the hands of rural people. It can be through schemes like MGNREGA; more investment in rural areas in the form of roads, irrigation, rural godown; adequate financing agriculture and rural traders, and rural housing. India provides $200 billion agriculture credit every year to small and marginal farmers. However, it is much less in terms of term loans; major portion is crop loans. The crop loans are mostly ever greening of the existing loans and in real term much less additional loan is provided. The real credit flow to agriculture should be significantly increased. Govt/NABARD is planning to form 10,000 new FPOs, as announced in this year’s union budget. This will be a boosting factor in uptake of agricultural credit.
The following questions, in this context, need special attention:
1. What are the important operational link between sluggish growth of rural economy especially agriculture and finance?
2. What are the important challenges and way forward for financing innovation and technology adaptation in rural economy?
3. How can the value chain funding in agriculture be augmented, especially when farmers anchor it?
4. What are the important frontiers of financing rural sectors that need to be focused?