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Informal sources of credit for farmers is a concern: Economic Survey

Economic Survey 2016-17 Volume 2 notices a rekindled optimism on structural reforms in Indian economy, however it expresses concern over farm sector and suggests reforms

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Credit is an important mediating input for agriculture to improve productivity and the predominance of informal sources of credit for farmers is a concern, reveals Economic Survey 2016-17 Volume 2, which was laid in the Parliament today. While noticing a rekindled optimism on structural reforms in Indian economy, the Survey said that there is regional disparity in the distribution of agricultural credit which also needs to be addressed.

According to the Survey, the average farm size in India is small, and declining since 1970-71. The predominance of small operational holdings is a major limitation to reap the benefits of economies of scale in agriculture operations.

“The progress in agriculture needs to be evaluated in terms of outcomes such as catching up with global yields of various crops as a means to increase incomes of farmers,” it said, adding that the key challenge that the horticulture sector faces in India are post-harvest losses, availability of quality planting material and lack of market access for horticultural produce of small farmers.

The Survey cautions that anxiety reigns because a series of deflationary impulses are weighing on an economy, yet to gather its full momentum and still away from its potential. These include: stressed farm revenues, as non-cereal food prices have declined; farm loan waivers and the fiscal tightening they will entail; and declining profitability in the power and telecommunication sectors. 
 
The Survey notes that real economy grew by 7.1 per cent in 2016-17 compared with 8 percent the previous year. This performance was higher than the range predicted in the Economic Survey (Volume I) in February.
 
Managing and reducing the various risks in agriculture activities can make the sector resilient, increase profitability and can ensure stable income flows to the farmers. The following reforms are suggested for increasing productivity in agriculture and allied sector:
 
1. To address the price risks in agriculture and allied sectors, marketing infrastructure along the entire value chain needs to be built and strengthened
2. To address production risks, the share of irrigated area should be expanded by increasing the coverage of water saving irrigation systems like micro irrigation systems
3. To increase productivity of crops, standards should be set and enforced for better quality, pest and disease resistant seeds
4. Trade and domestic policy changes should be announced well before sowing and should stay till arrivals and procurement is over
5. To enhance women’s involvement in the dairy projects, funds should be earmarked through appropriate mechanisms
6. Providing timely and affordable formal and institutional credit to the small and marginal farmers is the key to inclusive growth
7. Regime based on timely interventions 

1 Votes with an average with 4

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