Small farmers have little to cheer about

Agriculture is the saving grace for the UPA government as its 10-year rule draws to a close. With manufacturing in a continuous decline, Finance Minister Palaniappan Chidambaram’s interim budget for 2014-15 had only the farm sector’s performance to take comfort in. “We are proud of the stellar performance of the agriculture sector,” he said in the UPA’s last budget before the country heads for the next general elections.

But his payback for such a performance is unlikely to bring any cheer to the millions of small farmers who are responsible for the bumper harvests that have set records in foodgrain production for most of the UPA’s decade-long tenure. They have given the UPA something to boast about – agricultural GDP growth that has climbed steadily to cross 4 per cent. While agricltural GDP growth was around to 3 per cent in the five years of UPA-I, it is now set to surpass the 4 per cent it touched in the first four years of its second term to touch an estimated 4.6 per cent in 2013-14.

Credit target: Rs 8 lakh crore

The reward has been a steep hike in the credit available to the agriculture sector, a figure that has been rising consistently in every budget. For 2014-15, Chidambaram set a whopping Rs 8,00,000 crore as the target for lending, “encouraged” to do so, he says, by the fact that disbursements during the current financial are set to exceed the target of Rs 700,000 crore. According to him, agricultural credit during 2013-14 is likely to touch Rs 735,000 crore.

This is not a surprising announcement from the finance minister. Analysis has clearly shown that the ever-ballooning agriculture credit is benefiting farmers the least, much of it going to companies that are in the business of agriculture. This is because the UPA government has changed the definition of agricultural credit under priority sector lending (fixed at 18 per cent by the government). Anyone in agribusiness or related activities, from a host of companies to warehousing corporations and state electricity boards, can avail such credit and have been doing so at a voracious rate.

Small farmers' small credit share

Of the Rs 2, 29,400 crore farm credit advanced by banks in 2007, small farmers got a mere 3.77 per cent, the lion’s share going to large farmers or agribusiness ventures. Similarly, in 2011-12, when under the then finance minister Pranab Mukherjee the total farm credit had swelled to Rs 5,09,000 crore (against an enhanced target of 4,75,000 crore compared with Rs 3,75,000 crore in the previous year) small and marginal farmers accounted for only 5.71 per cent of the disbursements.

As Down To Earth has pointed out, small and marginal farmers got only 5.71 per cent. Even big ticket loans given to companies for agriculture and allied activities (in excess of Rs 1 crore) are considered priority sector lending.

The silver lining

The only measure that would actually benefit farmers is continuance of the interest subvention scheme that was introduced in 2006-07.  Chidambaram has announced a subvention of 2 per cent and an incentive of 3 per cent for prompt payment, thus reducing the effective rate of interest on farm loans to 4 per cent.  So far, Rs 23,924 crore has been released under the scheme.
 
The budget speech indicated that the current year’s food production is likely to be 263 million tonnes, up from the 255.36 million tonnes in 2012-13 and that agricultural exports, too, will be hitting new highs. From exports valued at USD 41 billion in 2012-13, the figure is expected to cross US $45 billion during the current year.
 
But farmers’ lobbies and agriculture economists say that the neither growth in farm GDP nor the spike in exports has translated into better incomes for the vast majority of India’s farmers who have continued to take their lives in several parts of the country.


 

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