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Issue No.: 574 | April 2015

Agriculture and Rural Indebtedness - VI

R. M. Mohan Rao
In this, the VIth part of the series on the indebtedness of farmers, Professor Mohan Rao continues the discussion on farmers’ participation in development programmes and various policy initiatives such as the role of the State vis-a-vis Indian agriculture, the phenomenon of rural indebtedness, rural credit and the nature of safety nets to deal with risks and uncertainties.

(xi) Farmers’ Participation in Development Programmes

Development programmes are conceived, planned and implemented with a sovereign disregard for the rather simple democratic precept that it is the people, for better or for worse, who need to exercise the right of choice over their destinies, even if these choices do not maximize returns as defined by political economists right or left. As rightly noted by Robert Chambers. "People are put at the last not once but again and again”. 

Participatory development has not only moral appeal but makes sense even on purely theoretical terms in the sense that people will only contribute voluntarily when they perceive such actions as beneficial to themselves. Peoples participation in development hinges on three basic components viz., participation in decision making, implementation of the programmes, material returns in terms of better services, facilities or incomes. There is hardly any evidence to show that it can be sustained for long through euphoria, moral exhortations or social

There is growing recognition of people’s participation as a vital component of development strategy. It has many positive features. Firstly, it gives recognition and dignity to the powerless people.

Secondly, it serves as a valuable instrument for mobilizing, organizing and enabling people themselves as problem solvers in their local environs and to do things for themselves. Finally, it acts as a channel for local communities to gain access to the larger macro arena of decision-making. Successes and solidarity won in accomplishing micro level problem solving might serve as - spring boards of credibility for major roles at higher
level in the future.

Recognising the advantage of people’s participation in development, many projects and programmes are being conceived and implemented but proved to be ineffective in practice for many reasons. To illustrate, Participatory Irrigation Management (PIM) through Water Users’ Associations is not as effective as expected due to the reluctance of technical and bureaucratic channels to handover the necessary records, water gauges as well as due to the absence of capacity measures. Similarly, the agricultural research system is expected to use feedback from farmers to help in setting the farmers’ agenda. In fact, the rationale behind setting up zonal research stations was to provide a channel for farmers’ participation in the research process. This has not happened. As a result research has become laboratory oriented with disregard for farmers knowledge, practices
and their concerns.


Policy Initiatives

1. The role of the State vis-a-vis Indian Agriculture - Broad Framework

The challenges confronting Indian agriculture are so formidable that farmers alone cannot face them successfully. It demands a comprehensive national effort to be an effective player in the liberalization regime. In
this, the State, which steered its destinies for more than a half century, has greater responsibility. In view of this the State must spell out its role with a focus on basic and fundamental issues confronting Indian agriculture. This is necessary to send the right signals to the farming community to reflect on future course of action, promote private investment in agriculture and allied activities. 

The Liberal conception of a State is that of a promoter and facilitator and not a detractor. On this premise, Liberals expect the State to play a pro-active role on the following lines:

  • Land and water are the most crucial but limiting factors for agricultural development. The State must initiate effective measures for the upkeep and strengthening of these basic foundations through participatory institutional structures at the ground level.

  • Growth promoting services viz., research, extension, supply of inputs, credit and marketing are essential for farmers in developing countries to withstand the powerful forces of modernization and globalization. The State has to pay greater attention to these aspects.

  • Removal of all restrictions on movement of farm products by farmers within the country and exim restrictions to strengthen national marketing and to build up sustained international markets for farm products.

  • Evolving effective foolproof safety nets to protect farmers from volatile markets and vagaries of nature.

  • Focus on increasing the earnings of individual farmers particularly the small and marginal in unfavourable areas. 

Against this broad framework of the role of the State, policy interventions on various issues are spelt out.

2. Institutional Initiatives to mitigate rural indebtedness and enhance credit flow

Rural Indebtedness

There is need for a comprehensive debt and investment survey on the lines of the All India Rural Credit Survey of 1950’s for a proper assessment of the burden of indebtedness among framers and to initiate corrective steps of a long-term nature. As a short term measure there is need to invoke debt relief measures on the lines of the Agriculture and Rural Debt Relief Scheme of 1990, and evolving a well thought out policy to scale down or wipe out the debt on the lines initiated by the provincial Governments in the pre-independence era to keep the farmers alive with his productive potentials.

3. Credit flow

The following policy interventions are considered to enhance credit flow to farming from institutional

  • De-politicisation of Co-operatives.

  • Issue of Kisan Credit Cards to all eligible farmers with increased credit limits to meet part of the consumption expenses and other family needs like children’s education and health without restrictions on end use as in the case of non-priority sectors.

  • Interest rates charged on agricultural loans should be lower compared to all other advances by the Banks.

  • One-time settlements of NPA should be made applicable to agricultural loans as well.

  • Banks loans to agricultural sector should form 18 per cent of their annual advances rather than outstanding advances of loans.

  • Scales of finance must be fixed realistically by taking changing market prices into account rather than treating it as a routine ritual.

In the existing situation there is need for a comprehensive debt and investment survey on the lines of the All India Rural Credit Survey of 1950’s for a proper assessment of the burden of indebtedness among farmers and to initiate corrective steps of a long-term nature. As a short term measure there is need to invoke debt relief measures on the lines of the Agriculture and Rural Debt Relief Scheme of 1990, and evolving a well thought out policy to scale down or wipe out the debt on the lines initiated by the provincial governments in the pre-independence era to keep the farmer alive with his productive potentials.

In this connection the seminar made an interim recommendation. Please see Annexure 6 for the text of these recommendations.[ i ]

PROFESSOR R. M. MOHAN RAO, retired NABARD Chair, Waltair, Andhra Pradesh. 

The purpose of serialising his Paper is to invite readers to share their views on the issues raised and recommend policies that would ensure a fair deal for India’s farmers. 

[ i ] Email:, or write to Freedom First, 3rd floor, Army & Navy Building, 148 Mahatma Gandhi Road, Mumbai 400001, if you are interested in getting a copy of Annexure VI.

To be Continued





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The Rural Perspective

Agriculture and Rural Indebtedness - VI

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Foreign Relations in the 21st Century

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