RBI for robust farm insurance to achieve 4% agriculture growth
Mumbai: With over two-third of India's agriculture dependent on rains, the RBI on Thursday pitched for a more robust weather insurance system and improvement in mechanism to deliver credit to small farmers to achieve 4 percent annual farm growth.
Speaking at the 30th anniversary of NABARD here, RBI Governor D Subbarao regretted that nearly three quarters of the farmer households do not have access to formal credit system and have no means to insure themselves against income shocks.
"We cannot raise agricultural growth consistently to 4 percent per annum without a focus on research and agricultural credit in rain-fed areas...There is also need for more robust weather insurance and agricultural extension services to target diversified livelihood options in the rain-fed areas," he said.
Subbarao called upon the lending institutions including commercial banks, RRBs and cooperatives, to develop "innovative credit products" to enhance flow of credit in rain-fed areas.
The RBI chief also raised concern about the financial health of the rural credit institutions which has deteriorated in the recent past raising questions about their sustainability.
During the period 2004-12, the gross NPA ratio in agriculture was higher than the corresponding ratio in the non-agricultural sector, except during 2009 and 2010. In 2011-12, agriculture sector NPAs rose by 47 percent as against 40 percent rise in the non-agricultural sector.
As per estimates, one percent rise in agricultural credit results in 0.22 percent increase in farm sector GDP. Government has set an agriculture credit target of Rs 5.75 lakh crore this fiscal, up from Rs 5 lakh crore a year ago.
Monsoon rains are considered lifeline of Indian agriculture and economy, as only about 40 percent of cultivable land is under irrigation.
Planning Commission has set a target of 4 percent growth in the farm sector during the current Five Year Plan (2012-17), up from 3.3 percent in the 11th Plan.
Although the agriculture sector contributes only about 15 percent to country's GDP, it employs over 50 percent of its population.