TERM LENDING FOR AGRICULTURE

The challenges Indian population projected to grow from 1.2 to 1.6 billion by 2025 and surpass China.Indian population projected to grow from 1.2 to 1.6 billion by 2025 and surpass China. Food production must nearly double by 2050.Food production must nearly double by At present growth rates, increased demand due to population growth and rising per capita income, likely to outstrip supply of essentials : cereals, pulses, edible oil and sugar.At present growth rates, increased demand due to population growth and rising per capita income, likely to outstrip supply of essentials : cereals, pulses, edible oil and sugar. Average size of land holdings has declined from 2.3 ha. In to 1.37 ha in and further to 1.16 ha.Average size of land holdings has declined from 2.3 ha. In to 1.37 ha in and further to 1.16 ha. Small and marginal farmers account for more than 80% but their share in operated area is only around 44%.Small and marginal farmers account for more than 80% but their share in operated area is only around 44%.

Challenges – External factors Climate changes likely to cause a decline in yields and a higher occurrence of extreme climate events. With the reduction in subsides on fuel and fertilisers, prices of agriculture inputs have risen Wage rates have increased at double digits per year in the last five years. G C F in agriculture and allied improved slightly from 11.2 % in to 14.2 % in , mainly due to public sector investments (incr from 6.0 to 8.2%) GCF from pvt sector declined from 10.2 % to 7.0 %

Status of agriculture Continuing slow pace of growth in agriculture – a matter of concern Contribution of agri sector to economy (pre)50% Now14% Employment in agro sector(pre)88% Employment(now)66% Population dependent on agriculture (Pre) 35 crore (70%) Population dependent on agriculture (now)70 crore (58%) NCAER estimate :By share of agri in GDP < 10%

Status in Gujarat Tops the country with CAGR of 10.7% Contributes nearly 15% of GDP More than 1.1 crore dependent on Agriculture Nearly 12% of area, under rain fed conditions Proportion of SF/MF : 63% having only about 27% of area cultivated Between and 11-12, area under major crops increased but area under food grains cultivation, decreased, while that of oilseeds, stagnated Production of groundnut & wheat affected due to deficient rainfall Marginal decrease in yield, especially cereals Even to sustain the present levels of growth in the state, increased flow of investments is essential and to spur creation of opportunities for diversification and expansion.

Trend in flow of investment credit (Rs. lakh)

Trend in flow of investment credit Share of term loans to total agriculture credit has steeply declined from a high of 36% to 26% During the last two years, achievement of targets set for investment credit fallen short by 20 to 30%, with less than average performance by coops Investment credit has recorded -ve growth of 14% during Growth in total agriculture credit mainly accounted by crop loans Per ha investment credit is not even Rs Factoring in the facts that acreage and proportion of borrowers of OF are substantial, per ha credit to SF/MF is likely to be meagre (< Rs. 5000/-)

District-wise and Bank-wise perfromance District-wise :Declining share of investment credit observed in as many as 8 districts (Amreli, Banaskanta, Bhavnagar, Gandhinagar, Jamnagar, Kutch, Patan, Sabarkanta Higher than State average observed in Ahmedabad, Anand, Kheda, Junagadh, Mehsana, Navsari, Panchmahal, Surat, Tapi and Valsad Bank-wise :

Goals for development Increasing productivity of factors - Increasing yield per unit area or improve the productivity of land, water, livestock and labour Sharing growth (equity) : focus on small and marginal farmers, lagging regions, rainfed areas, women etc. Size of farm holdings (Making marginal farm holdings viable) - Farm aggregation models – Producer organisations/contract farms Agriculture forms the resource base for agro-industry, agro- services which includes farming, wholesaling, warehousing including logistics, processing and retailing Diversification to high value agriculture convert unskilled agricultural labourers into skilled entrepreneurs engaged in organized market driven non–farm enterprises, Agro processing units, Units offering marketing infrastructure etc

Facilitating role of NABARD Credit – PLP/ District Plans / State Focus Paper – Monitor flow of credit – SLBC/DCC/BLBC – Coordination among stakeholders – Refinance to eligible institutions – Rs cr Adminstering credit linked subsidy schemes of GoI Support interventions through dedicated funds Promotional support – Orientation/Sensitisation Meets for Banks/NGOs – Intensive capacity building and promotional efforts – SDI/REDP, Clusters Development Development of Rural Infrastructure NABCONS

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Notes for prev slide Creation of more irrigation potentials and encouraging Private participation / Joint venture participation through Special Purpose Vehicle (SPV) in agriculture Encouraging private investment in avenues like production of quality seeds, micro nutrients, cold chains and establishment of large and sophisticated controlled atmosphere cold storages, construction of market yards and all infrastructure for post harvest operations. Encouraging Agro / food processing units and financing end-to-end activities of Agriculture production under Agriculture finance.

Notes for prev slide - contd Increased investment in irrigation, watershed development, wasteland development, land reclamation, etc. In addition, there has to be a greater focus on the accelerated development of the rural non-farm sector and development of clusters around towns/market centres

Source for reference IBA c’tee report on incr credit Agcl cr issues Sf mf problems pdf Trends in agcl term loans pdf Presntn prepared for inv cr workshop