• Agricultural credit

Agricultural credit and insurance

Based a survey conducted in three villages in the Indian state of Orissa, this article suggests that apart from the production failures and risks encountered in the increasingly volatile output markets, access to credit and terms of borrowing have emerged as main causes of the agrarian crisis in India.

With the increasing integration of agriculture to the global dynamics of commodity production and the spread of new technologies, the credit need has grown manifold. However, because of the current emphasis on the commercial viability of the banking sector and the reduction in subsidies of various kinds, farmers are forced to rely increasingly on the costly and exploitative informal sources of credit.

The author suggests the following main remedial measures:

• increasing the accessibility ofinstitutional credit by a targeted and sector-specific expansion of formal credit, mainly through strengthening the rural banking system and innovative group-lending schemes.
• expansion of the resource base of the poor and the marginalised groups by expanding access to education and strengthening rural non-farm economy
• increasing the productivity of agriculture
• improving rural infrastructure including irrigation and connectivity

The author also notes that the sustained agrarian distress of the current magnitude are partly structural and it requires more than cosmetic and one-time ‘miracle packages’ to address the underlying issues. The strategy to address these issues should include:(1) a fire-fighting approach to stop the situation from deteriorating further;and (2) a long-term strategy to find durable and equitable solutions to the fundamental problems facing the Indian farmer in the context of globalization.

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