NABARD can change face of rural India

Need for a new approach to make agriculture and rural economy strong

The need to support the rural sector which is the real support of our promising economy has been well recognized and the efforts that have gone in this direction have been enormous and institutions set up to aid this sector have been aplenty. The allocation of resources exclusively to develop the agriculture and other rural segment of the economy by the Central and State Governments, financial institutions and other agencies is huge by any reckoning and the results achieved also albeit are commendable, but fall short of expectations. Definitely, the contributions from the rural sector particularly from agriculture do not commensurate with the resources spent or allocated.

The agricultural sector hitherto considered to be the backbone of the economy cannot and should not remain weak for long. The sector unfortunately is still a gambling on monsoon and dependent on informal credit .The problems encountered by the farmers (particularly small farmers and people from rural areas engaged in different vocations again belonging to lower segment) broadly relate to understanding and taking advantage of various facilities available from multi agencies such as Commercial banks, Regional Rural banks, Cooperative Banks, Local area banks, Government agencies, Self Help Groups, Micro Finance institutions absence of a steady income, high fluctuations in the prices of their products, high level of inflation affecting their limited and uncertain income, increased input costs, lack of dependable infrastructure like electricity, transport, marketing and storage facilities.

Reforms of land, labour laws, education system, elimination of middlemen, integrity of data relating to employment and creation of assets, migration of labour, proper identification of beneficiaries, corruption at all levels, lack of coordinated approach of agencies involved, unsympathetic and absence of commitment in the approach of credit providers , exploitation of the situation by powerful money lenders, dominance of large and influential farmers, lack of political understanding at states ruled by different political parties are the areas challenging effective and meaningful financing of agricultural and rural sector.

There is an urgent need to find a change in approach with a new focus to turn the rural sector attractive and regain its dwindling share in GDP growth.

Basically development of agriculture and rural sector is a state subject and the initiative and leadership have to come from the states. The introduction of Rural Development Index based on which allocation of resources and grant of incentives by the Central Government can perhaps be a good beginning. The index should reflect improved rural infrastructure, enhanced productivity in agriculture, augmentation in productive rural assets including agricultural land and stoppage of migration of labourers to urban areas, reduction in poverty level, and change in the confidence of the people to continue to show interest in agriculture and rural activities.

National Bank for Rural and Agricultural Development (NABARD) has to play a constructive role in ensuring that the coordination between the States and the institutions involved in rural development is smooth and result oriented. NABARD needs to have a very focused and different approach for each state in identifying the gaps, deficiencies and problems in the development of agriculture and rural industries and providing the needed coordination, support, guidance and encouragement to the agencies involved therein.

The multitude of agencies presently visible adds confusion and conflict of interest giving room for unhealthy practices, corruption and abuse of facilities. The approach should be preferably to have a single window concept and the institution should coordinate the support system including insurance for the borrowers with the aid of NABARD. The institution having a strong presence in terms of business, infrastructure and having proven commitment in serving the people should take up the role. The commercial banks should gradually give way to Regional Rural Banks (wherever feasible), Strong Cooperative banks or Local area banks and Micro finance institutions. NABARD can play an active rural in identifying the institution fit to serve a particular block or area and provide the leadership. The State Government and NABARD have to jointly change the rural face by introducing incentives and awards for retention of interest in the agricultural and rural activities both among providers of credit and borrowers. The Information Technology and the proposed Unique Identity Card can be of great help to optimize the distribution of credit and making the Financial Inclusion a reality.

Ultimately the human resources associated have to be mentally attuned to help the needy. The involvement of top Management Institutes and social workers can be thought of to activate the rural economy and realize enduring real benefits to the whole economy and its people.

T.V. Gopalakrishnan
Former Chief General Manager,
Reserve Bank of India.

(An edited version appeared in The Hindu Business Line 28/06/10)