Farmers’ income doubled over five years for certain crops in some states: SBI report

Farmers’ income doubled in FY22 compared to FY18 for certain crops in some States (like soyabean in Maharashtra and cotton in Karnataka) while in other cases, it rose 1.3-1.7 times, according to the State Bank of India’s Economic Research Department (ERD). The ERD came to the aforementioned conclusion based on a study of primary data of SBI’s agriculture portfolio across States.

Interestingly, the increase in income of farmers engaged in cash crops (such as tea, coffee, sugarcane, cashew and rubber) has been more prominent compared to such farmers growing non-cash crops (such as wheat, rice, maize and millets), according to the study.

Additionally, allied/non-farm income showed a significant increase of 1.4-1.8 times in most States, in tandem with farm income during the same period. This substantiates the trend as per the 77th National Sample Survey that the source of farmer income has become increasingly diverse apart from crops, the study said.

The study assessed that “Agricultural policies are ushering in a greater tomorrow ... greater than 1.7 times jump in farmers’ income since FY18, with a statistically decisive upward shift in mean income and no significant change in income inequality...” Soumya Kanti Ghosh Group Chief Economic Adviser, SBI, observed that the Minimum Support Price (MSP), which is increasingly aligned with market-linked pricing and has increased by 1.5-2.3 times since 2014, has been pivotal in ensuring passage of better prices to farmers.

This has led to an optimal price discovery, setting ‘floor price benchmark’ for multiple crop varieties (23 as on date) and also encouraging farmers to gradually move over to crop varieties that have better yield/value, he said.

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Farm loan waiver

Ghosh opined that despite much hype and political patronage, farm loan waivers by States have failed to bring respite to intended subjects, sabotaging credit discipline in select geographies and making banks/financial institutions wary of further lending.

Since 2014, out of around 3.7 crore eligible farmers, only about 50 per cent of farmers received the amount of loan waiver (till March 2022), though in some States, more than 90 per cent of farmers received the debt waiver amount. “Essentially, a ‘self goal’ inflicted by the State on its subjects!” Ghosh said.

Agri-livelihood credit card

The ERD recommended simplifying the norms for ‘review/renewal’ of Kisan Credit Card (KCC) loans, with repayment of interest alone should thus be the top agenda of the regulator.

Also, deepening the use of technology by banks (using satellite imagery data for real-time monitoring of crops, or utilising third-party approved agents for submitting field inspection reports through video-calling facility and separating the review from the core banking system, making it app-based through digital channels) will ensure speedy ‘review and renewal’ practices.

The ERD suggested introducing an agri-livelihood credit card (LCC) encompassing a multi-purpose loan (with overdraft/revolving credit up to ₹1 lakh) covering a rural household’s entire activities parallel to KCC initially.

Assuming 10 lakh beneficiarie, with an average loan of ₹50,000 each, the total loan disbursements would be ₹5,000 crore in a year, further reinvigorating rural demand.

Agri-credit guarantee fund

Further, if loans are covered under credit guarantee schemes, risk weightage will be zero for the covered portion. The ERD recommended establishment of an omnibus Agriculture Credit Guarantee Fund Trust-Agri and Allied Sectors (CGFT-AAS), under the aegis of CGTMSE, which could push up fresh agri-lending exponentially, giving financial intermediaries confidence to look at agri-proposals without apprehensions of piling up of sticky assets.

Assuming an initial corpus of ₹5,000 crore for the proposed CGFT-AAS, and an average leverage of 15 (to be increased suitably later), fresh loans that can be guaranteed through this fund will amount to ₹5.25-lakh crore.