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Thereafter, in the first decade of the new century, the C.S. Murthy
Working Group on Priority Sector Lending (RBI, September 2005) has
accorded considerable thought to the relevance of continuing with the directed
credit arrangement for agriculture and allied activities. No doubt, the failure of
scheduled commercial banks to expand their credit base for agriculture is also
to be seen against the relative decline in the share of agriculture in the country’s
economy. In a nutshell, the share of agriculture and allied activities in total GDP
has steadily slipped from 38.9% in 1980-81 to 31.3% in 1990-91 and further
to 17.5% in 2006-07; it has remained at 17.5% in 2011-12 and at 17.4% in
2012-13. Therefore, an obvious policy question that is repeatedly asked is
whether the 18% of net bank credit target set for agriculture should still be
valid. As reviewed above, various experts have held that it remains valid. There
are a few other important considerations which make us perceive so. First, the
proportions of paid-out costs in terms of modern inputs have considerably
increased in agriculture over the years. Second, vast diversifications are taking
place in agriculture away from crop husbandry and in favour of horticultural
and livestock products, which require higher amounts of short-term and
investment credit. Third, these are the new production activities which have a
large export potential, and in the context of a competitive environment under
the WTO arrangement, they could be supported by special credit facilities.
Fourth, the proportion of workforce dependent on agriculture remains at
about 56.5% as per the latest NSSO results for 2004-05 and at 53.2% in 2009-
10. Fifth, as brought out in the initial part of this study, the proportion of
marginal and small-size operational holdings constitutes 87.6% of the total
and they account for 43.5% of the area operated as per 59
th
NSSO Round for
2002-03 or 84.97% and 44.32%, respectively, as per the Agricultural Census
of 2010-11. Very large numbers of such farmers require credit support not
only for agricultural operations but also in their diversification activities into
allied agricultural activities as well as into non-farm enterprise areas; the latter
will be treated as farm sector borrowers until they graduate into independent
non-farm professions. In fact, as per the Agricultural Census data, in the first
decade of this century, the number of marginal holdings has shot up from
75.41 million to 92.36 million and their landholdings have increased from
32.03 million to 35.41 million. Finally, of the 89 million farm households in
the country, as many as 46 million or 51.4% stand excluded from any credit
arrangement, official or private. The exclusion by official agencies is as much
as 80% of farm households. This explains the gap that is required to be filled
if a genuine policy of “financial inclusion” has to be pursued.
