46
to be the single largest occupation “as it still provides livelihood to about two-
thirds of the population”, of whom a predominant number comprises of small
and marginal farmers.
Over years, a number of scholars and semi-official bodies have also
examined demand-supply gaps in agricultural credit based on some objective
assessment of credit needs and they have generally concluded that the gaps
have been very large (Surjit Singh and Vidya Sagar 2004). The situation has
not undergone much of a change since the National Commission on Agriculture
reported in 1976 a gap of over two-thirds. The Agricultural Review Credit
Committee (RBI 1989), and the successive working groups for five-year plans
– the Kotaiah group for the ninth plan (1997-98 to 2001-02) and the Y.C. Nanda
group for the tenth plan (2002-03 to 2006-07) – have all anticipated similar
gaps in the supply of farm credit. For the eleventh plan period (2007-08 to
2011-12), the projections of ground level credit (GLC) purveyed by commercial
banks, RRBs, cooperatives and other rural financial institutions, have been
placed at
`
1640,000 crore implying an annual compounded growth of 17%
over
`
639,330 crore of expected GLC during the tenth plan period (2002-03 to
2006-07). In fact, the projections made do not take into account the excluded
farmer categories cited above [RBI Bulletin, May 2007].
The projection study under reference for the 11
th
Plan makes a pointed
reference to the complex issues of demand for and supply of ground level credit
(GLC)
5
for the farm sector; it is worth citing here:
“Targeted Eleventh Plan growth (at 8.5%) warrant a growth
of at least 3.9% in the agriculture sector, which would presuppose
private sector investment and credit flow to agriculture. Government
has accorded thrust for enhancing the Ground Level Credit flow. The
doubling of credit within 3 years starting from 2004-05, would have
implication on the projections of GLC in agriculture. As against the
average growth of 16 to 17% during the 1990s, the envisaged growth
in the programme was more than 30% per year. Though the level of
achievement is staggering, sustainability of the pace of growth is in doubt
on account of two counts,
viz
., the capability of the sector to absorb
the credit addition and the capacity of the credit purveying institutions,
especially cooperative sector as a supplier. Credit absorption capacity
of the rural sector depends on factors such as proper agriculture
infrastructure, availability of suitable technology, extension services,
5
Ground Level Credit refers to the credit purveyed by commercial banks, rural financial
institutions like cooperative banks and regional rural banks and other agencies.
