Credit to employment- intensive sectors: Is the revival real? R. Ramakumar Pallavi Chavan

Rate of growth of credit from scheduled commercial banks to major employment generating sectors, , in per cent per annum

So, in agriculture, The sharp increase in flow of credit after the late-1990s has not led to a revival in the growth rates of agricultural GDP. On the employment front, between and , the growth rate of agricultural wage employment declined. Are certain features of the credit revival holding back its growth and employment linkages?

First, the growth rate in agricultural credit in the 2000s originates primarily from a growth in indirect finance to agriculture Direct finance is credit given directly to agriculturists. Indirect finance refers to credit given to institutions and organisations that contribute to agricultural production.

New components of indirect finance Lending to NBFCs for on-lending to agriculture (agri-clinics and agri-business); Loans to Electricity Boards to reimburse expenditure incurred on providing power to agriculture; Deposits held by banks in RIDF maintained with NABARD (deficits on priority sector); Finance to dealers in drip/sprinkler irrigation systems and agricultural machinery; Subscriptions to bonds issued by NABARD for financing agriculture and allied activities.

Secondly, a very large share of the incremental credit supply has been obtained by big farmers In the RBI publications, cultivators are divided in the following way according to land size-classes:  Marginal cultivators: < 2.5 acres  Small cultivators: 2.5 to 5 acres  Big cultivators: > 5 acres

Thirdly, the revival has been driven by a remarkable growth in loans above Rs 10 crore

Who are the beneficiaries of the revival? Through a massive expansion of indirect finance, leading to the sidelining of direct finance; Through an expansion in credit supply to big farmers; Through an expansion in provision of loans of size above Rs 10 crore, and particularly above Rs 25 crore.

Financial inclusion or exclusion?

The exclusion of Dalits and Adivasis from the formal financial system

The exclusion of Dalits and Adivasis population from the formal financial system

Self-employment generation in India Most self-employment programmes are credit-subsidy linked. The role of IRDP in self-employment generation in the 1980s. The declining role of IRDP in the 1990s, when overall employment generation also stagnated. Replacement of IRDP and TRYSEM with the SGSY and PMRY. SGSY has been linked with the SHG movement.

Credit flow through SGSY and PMRY

Number of beneficiaries assisted under SGSY

There has been a progressive weakening of the public financing of self-employment programmes. A strategic shift to self-employment, financed by credit, has not taken place.