The Importance Of Agricultural Growth

Agricultural growth must be underpinned by a reliable and efficient financial system capable of making compatibility between the expansion or adequacy of credit flow and both the investment and working capital needs of the agricultural sector. The financial sector reforms of 1991 had created a basic fear that this would lead to the dilution of the directed credit policy or priority sector lending by the commercial banks and the deregulation of interest rates which consequently reduced the flow of credit to agricultural sector along with higher interest rates on agricultural loan amounts. However, the recommendations of the Narasimhan Committee were not accepted. Instead, what the authorities …show more content…
Disbursement of agricultural credit direct to the farmers-take place in the areas where irrigation facilities are available in abundance. Drought prone areas suck the credit where watershed management and drought-proofing measures have taken place. If the objective of reprioritization were to ensure that the credit flow to the needy, in time, and also in tune with the growing requirements of input use, the committee would have done a deeper analysis before re-allocating the …show more content…
Advances to farmers against pledge/hypothecation of agricultural produce (produce marketing loans loans) under priority sector enhanced from Rs 5,000 to Rs 25,000 and duration increased from three months to six months in October 1993 and the limit has further increased to Rs 1 lakh (inclusive warehouse receipts) in September 1995. In March 1994, advances to farmers for acquisition of jeeps, pick-up vans, mini-buses, etc, reckoned as agricultural advances under priority sector. Dasgupta (2002) has highlighted that advances to the farmers for acquisition of jeeps, pick-up vans, mini-buses will definitely not be acquired by small and marginal farmers because they were not going to be used for transporting agricultural produces to improve their marketability and the production level but will help the affluent farmers in diversifying their activities to non-farm activities. As far as the indirect finance to agriculture is concerned which was not a part of priority sector target earlier but now finances to dealers, commission agents, non-banking financial companies (NBFCs), state electricity boards (SEBs) and investing in selected bonds and depositing in apex level financial institutions were considered to be priority sector lending were not going to