Wish to increase net farm income? Root for institutional agricultural credit!

Farmer in Uttrakhand. Credit (flickr): Divya Pandey/IFPRI

More than half of India’s workforce is engaged in agriculture and its allied activities. However, the condition of the agricultural community, in the country, is not very encouraging. Lack of accessibility to formal credit pushes the farmers to reach out to the informal credit sources, mainly the local moneylenders, avail credit at exorbitant interest rates and thus, entering into a debt trap.

Indian agriculture policy aimed to reduce the farmer’s dependence on informal credit and increase the accessibility to formal credit. Various policy initiatives have been taken by the government in this regard starting from nationalization of large commercial banks (1969 and 1980) and establishment of Regional Rural Banks (1975), National Bank for Agriculture and Rural Development (1982), to farm credit programs like the Kisan Credit Cards (1998–1999) and the Interest Subvention Scheme (2010–2011).

Efforts have also been made to strengthen the formal credit system through programs like Priority Sector Lending (PSL) and recently with financial inclusion schemes Pradhan Mantri Jan Dhan Yojana (PMJSY) and Swabhimaan. Although these initiatives have indeed made a positive impact in the agriculture credit system with continuous increase in the agriculture credit flow in the rural areas, yet the informal credit sources still account for more than one third of the agriculture credit flow.

Of late, there has been rising demands, in different states of the country, for waiving off farmers’ loan as a measure to deal with the debt crisis. Some state governments have already announced the waivers. However, this appears to be a very short term solution to the current problem. There aren’t much evidence that suggest that loan waivers have a positive impact on either the farm/ household income or their expenditures. Alternatively, increasing farmers’ access to formal credit mechanism is believed to empower them, help them channelize their resources better and in turn boost the agricultural economy. A recent IFPRI discussion paper Institutional versus Noninstitutional Credit to Agricultural Households in India: Evidence on Impact from a National Farmers’ Survey tries to understand the role of institutional farm credit on farm income and farm household consumption expenditures.

The findings of this study reveal that farmers with smaller land size find it difficult to borrow from formal credit system in the absence of collateral and thus resort to borrowing from informal sources. Caste also seems to be a factor affecting the access to formal credit sources as most formal borrowers were from the General and Other Backward Classes (OBC) and fewer from the Scheduled Castes (SC) and Scheduled Tribes (ST).

Apart from this, male-headed household were found to be receiving greater share of institutional credit as opposed to their female counterparts. Educated households had access to formal financing sources more than others. For example, households that are aware of the government schemes such as Minimum Support Prices (MSP) were more likely to obtain credit from formal sources.

Access to formal credit was found to have a direct relationship with the net farm income and per capita household expenditure. Increase in access to institutional credit was seen to increase the farm income and also the consumption expenditure. Thus, accessibility to formal financing could significantly improve the overall economic welfare of the agriculture households.

The study, suggests that existing policy and program initiatives must be scaled up in order to expand the reach of formal credit systems and increase farmer’s accessibility, especially of small and marginal farmers, to institutional credit. As highlighted by the findings of the study, concerted efforts needs to be taken to reduce the social discrimination in the financial sector based on gender and caste. Literacy levels, especially financial literacy levels, need to be improved considerably. Convergence among different policies would significantly help in bringing out desired results and increasing the share of institutional credit in the agricultural credit system. It’s time to break the debt cycle for the farmers and give them their due as economic and social welfare of farmers is a prerequisite for a healthy and progressive India.


SAFANSI Roundtable: A Focus on Government Action for Nutrition in South Asia

High-level summary: The event will draw on the latest evidence and experience from current nutrition-sensitive and nutrition-specific programs, and will explore the implications for acting at scale with such interventions, including financing, return on investment, communication, advocacy, monitoring and evaluation dimensions. 

Date: September 7-8, 2017 | Kathmandu, Nepal |Hotel Yak and Yeti

Objective:  Advance multi-stakeholder and multi-sectoral national and subnational efforts to address nutrition as a priority and scale up nutrition efforts together.  Additionally, address budgeting for nutrition at the regional, country and subnational level, including domestic, public and private financing.

Outcome: Key public sector, business, donor and civil society decision makers raise the profile of nutrition in their home countries and find effective ways to work together.

Participants: A mixed group of policy and program planners, and nutrition experts, working with the following institutions:

  • The target participants are Chairs (or designated senior staff) of Planning Commissions at the national and subnational levels, or equally senior government officials who are responsible for addressing malnutrition for their government.
  • Speakers/panelists should be drawn from government ministries, relevant research organizations, civil society, donor organizations, and private sector.
  • Additional invitations will go to:
    • Policy makers/Politicians
    • Civil Society and Nutrition Focused Organizations (SUN, SNV, Nutrition International (NI), GAIN, etc.)
    • Donor organizations (DFID, EC, DFAT, USAID, etc.)
    • Relevant UN organizations (UNICEF, WFP, WHO, FAO, UNDP)
    • International and regional NGOs (SUN, LANSA, GFAR, SAARC, etc.)
    • Research institutions (LANSA, IFPRI, etc.)

More details

World Water Week: Experimental games spark community cooperation on groundwater in India

Cross-posted from ifpri.org written by Ruth Meinzen-Dick, IFPRI

I grew up in Tamil Nadu, south India. It was a dry area, but a good well supplied our house and a few other houses around us. Then one year a farmer nearby installed a deeper well with an electric pump, and our well ran dry. That started a “race to the bottom”: As more and more farmers got pumpsets, the water table continued to fall and everyone had to deepen their wells to keep up.

Today, India faces this problem writ large. Over 60 percent of the irrigation and 85 percent of domestic water in India now comes from water below the ground. As water tables fall, wells need to be dug deeper and more pumping power is required to deliver water to users. Ultimately, groundwater becomes unavailable.

World Water Week 2017 (Aug. 27-Sept. 1) focuses on conserving and reducing waste in water use. These efforts are especially relevant for groundwater supplies, which are often overtaxed and difficult to manage responsibly.

Because well owners who take water from the same aquifer may be geographically dispersed, it is hard for them to know how much others are taking, let alone regulate their own withdrawals. And because underground water dynamics are complicated, people often don’t understand how their water use affects others.

Experimental games can help reveal what motivates people to cooperate in the use of any jointly used resource—including groundwater, as well as forests, fisheries, and surface irrigation. Until recently, no one had assessed whether these games could help stimulate cooperation as well. To investigate this issue, IFPRI partnered with the Foundation for Ecological Security (FES), an NGO in India, and Arizona State University, with support from the CGIAR program on Water, Land and Ecosystems. FES, which helps communities in Andhra Pradesh better manage their water resources, added a “groundwater game” designed by ASU experts to its program in some of the communities affected by groundwater depletion.

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Green Revolution in Eastern India: Constraints, Opportunities and Way Forward

Call for Abstracts

Puri District, Odisha, Oct 2012 Source: Vartika Singh, IFPRI

You will agree with me that the eastern region of India, comprising Bihar, Chhattisgarh, Eastern UP, Jharkhand, Odisha and West Bengal is lagging in agriculture and is home to more than 50 percent of India’s poor and food insecure population. More than three fourths of poor in the region lives in rural areas. India’s success in reducing rural poverty from 53 percent in 1977/78 to 21.4 percent in 2011/12 is attributed mainly to the green revolution. However, the eastern region was by passed from the benefits of green revolution and the increasing concentration of the rural poor in this region is a reality. The persistence of high poverty and food insecurity has a serious economic, social and political implications.

Agriculture in eastern region of India is slowly transforming, but the pace needs to be accelerated by reforming policies, institutions, and markets and by developing agri-infrastructure. Several initiatives such as “Bringing Green Revolution to Eastern India (BGREI)” have been launched to push green revolution for accelerated agricultural growth in this region. However, the region is struggling to ensure sustainable high agricultural growth and continues to linger in a vicious circle of low input – low output syndrome. To overcome the challenges and unleash the opportunities, a critical understanding of the constraints which are impeding the real take off, of green revolution in eastern India needs to be thoroughly analyzed and understood.

To address these issues, we are organising a conference on “Green Revolution in Eastern India: Constraints, Opportunities and Way Forward” on Oct 09-10, 2017 at NASC, Pusa, New Delhi, India. The conference is jointly organized by the International Food Policy Research Institute (IFPRI) and Tata Cornell Institute for Agriculture and Nutrition (TCI).  The conference is expected to evolve a “road map” with clear prioritization and strategies for accelerated and sustainable agricultural growth in eastern India.

We are inviting contributions from you and your colleagues for presentation in this conference. We shall appreciate if you and your colleagues submit a brief abstract of about 500 words for including in the conference by September 7, 2017 in the following broad areas:

  1. Constraints in Production System
  • Agricultural performance in Eastern India vs Western India
  • Land ownership and tenurial arrangements
  • Investment and subsidies
  • Agricultural risks
  1. Technology Adoption and Constraints
  • Adoption of improved varieties
  • Adoption of conservation technologies
  • Farm mechanization 
  1. Institutions and their Effectiveness
  • Irrigation and water markets
  • Financing agriculture
  • Agricultural markets
  • Farmer Producer Organizations
  1. Opportunities in Eastern India
  • Bridge yield gaps
  • Potential of agricultural diversification
  • Potential of rice-fallow utilization
  • Opportunities for agro-processing
  1. Role of Private Sector
  • Climate smart agriculture
  • Solar power for irrigation
  • Reform to promote agri-business

You can send your abstract to Vaishali Dassani (v.dassani@cgiar.org). Please send complete details, including the topic under which your abstract falls and the corresponding address.

Concept Note


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