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shares in agricultural incomes of almost all the developed and underdeveloped
regions have remained the same as between the early 1990s and the last three
years of the latest decade: 17% and 17.6% for the northern region, 17.4%
and 17.1% for the eastern region, 22.5% and 21.5% for the central region,
15.0% and 16% for the western region, and 24.4% and 24.1% for the southern
region. In contrast, the farm GLC shares of the advanced regions have sharply
increased, while those of the underdeveloped regions have declined except the
eastern region for which the credit share has move up from 6.7% in 1995-96
to 8.2% in 2010-11. The farm credit share of the central region has slipped
from 16.1% to 13.4% and that of the western region from rather sharply 19.3%
to 13.4%. At the other end, the farm credit share of the northern region has
increased from 20.7% to 24.7% and that of the southern region from 37.4% to
39.3%. There is thus the vast scope for expanding farm credit to agricultural
GDP ratio in the country so as to reduce inter-regional disparities.
C. New Initiatives for Expanding Credit Base
for Agriculture and Other Informal Sectors
(i) Quick–Fix Solutions can be Harmful
The story that has unfolded in earlier sections of the study has provided
a number of solutions on the more effective involvement of formal banking
institutions in meeting credit support for farmers. It is the considered theme
of this study that the repeated adoption of quick-fix solutions for solving the
problem of agricultural indebtedness and for facilitating better credit delivery
for farmers, have been harmful for both the banking institutions as well as the
long-term interests of the farm community. The Committee on Agricultural
Indebtedness (Chairman: Dr. R. Radhakrishna, July 2007) constituted by the
Government of India, had addressed the issues in a wholesome manner, but
to use the Union Finance Minister’s phrase, “stopped short of recommending
waiver of agricultural loans” (Budget Speech of 2008-09); the Committee had
a deep logic.
The Radhakrishna Committee provided a series of long-term and
enduring solutions; it addressed issues relating to the creation of credit
absorption capacities, need for risk mitigation practices and risk preventive
measures such as drought management systems based on Remote Sensing
methods, special credit arrangements for rain-fed areas including the
introduction of cyclical credit programme, and strengthening of the financial
architecture with the spread of appropriate banking outlets and instruments
of credit. Instead, the Union Budget for 2008-09 announced the scheme of
agricultural debt waiver and debt relief for farmers, which together was initially
