Rural Economy in India

The Rural Economy in India is wholly agriculture based and it is of tremendous importance because it has vital supply and demand links with the other Indian industries. Agriculture is the main stay of the Indian economy, as it constitutes the backbone of rural India which inhabitants more than 70% of total Indian population. The fertility of the soil has augmented the success of agriculture in India. Further, Rural Economy in India has been playing an important role towards the overall economic growth and social growth of India. India has been predominantly an agriculture-based country and it was the only source of livelihood in ancient time. During prehistoric time when there was no currency system the India economy system followed barter system for trading i.e. the excess of agricultural produce were exchanged against other items. The agriculture produce and system in India are varied and thus offers a wide agricultural product portfolio. Today, the rural economy in India and its subsequent productivity growth is predicated to a large extent upon the development of its 700-million strong rural population. The agricultural economy of India is drafted according to the needs of rural India since majority of the population lives in about 600,000 small villages. In India, agriculture accounts for almost 19% of Indian gross domestic products (GDP). The rural section of Indian population is primarily engaged with agriculture, directly or indirectly. The Ministry of Agriculture, the Ministry of Rural Infrastructure, and the Planning Commission of India are the main governing bodies that formulate and implements the policy related to rural economy in India and its subsequent development for the overall growth of the Indian economy. The main agricultural products that controls the fate of the Rural Economy in India are as follows y y y

Food Grains - Rice, Wheat, Pulses, Cereals, Corn, Maize, Rice Bran Extractions, Sorghum, Soy meal, Suji, Parmal, Lentils, Jowar, Bajra, Chick pea. Fruits and Nuts - Cashew Kernels, Cashew Nut, Cashews, Almonds, Roasted Dry Fruits, Peanuts, Groundnut, Walnut Kernels, Walnuts, Indian Peanuts, HPS Groundnuts. Fruits - Bananas, Beans, Cherry, Cucumbers, Dried Fruits, Dried Truffles, Carrots, Lemon, Mandarins, Mango steens, Meslin, Shallots, Apples, Asparagus, Grapes, Oranges, Gherkins, Turnips, Oranges, Papaya, Pineapple. Vegetables Potatoes, Bitter gourd, Stripe Gourd, Pumpkin, cauliflower, Cabbage, Tomato, Onion, Green Pepper, Drum Sticks, Lady's finger, Banana, Papaya, Spinach, Cucumber, Mushroom, Mushroom Spawn, Radiata. Seeds, Buds, Plantation and Related Products - Basil Seed, Cumin seeds, Dill Seed, Buds, Celery Seed, Hybrid Seeds, Sesame Seeds, Sesbania Seed, Sunflower Seeds, Mustard Seeds, Oil Seeds, Plant Products, Plantation, Plants, Psyllium Seed, Fennel Seed, Fenugreek Seed, Herb Seeds, Tamarind Seed, Vegetable Seeds. Spices - Black Pepper, Chilli Powder, Chillies, Cinnamon, Cloves, Coriander Powder, Cumin, Curry Powders, Dry Ginger, Dry Red Chilly, Cardamom, Anise, Salt, Onion Powder, Pepper, Fenugreek, Clove, Ginger, Turmeric, Turmeric Powder. Tea and Coffee - Black Tea, Coffee, Coffee Beans, Darjeeling Teas, Assam Teas, Instant Coffee, Leaf Coffee, Leaf Tea, Packaged Tea, Green Tea, CTC Teas.

Tobacco and Tobacco Products - Beedi, Betel nut Leaves, Betel nut, Bidi Leaves, Chewing Tobacco, Cigarettes, Arecanut, Jarda, Scented Tobacco, Smoking Tobbacco, Snuff, Opium, Pan, Chatni, Pan Masala, Gutkazarda, Zafrani Zarda. Cotton, Rubber, Jute etc..

Rural Economy in Indian Budget

The Rural Economy in Indian Budget finds the much-needed attention in the recent years, which was due over the last 10 years. With the astronomical growth of the Indian economy during the early 1990s, the focus of the Indian Government shifted from agriculture to industrialization. The growth of Indian agriculture suffered due to this shift of stance, since agriculture is still the backbone of Indian economy and more than 70% of its total population is engaged with agriculture (both directly and indirectly) for livelihood. During the mid 1990s, the manufacturing industry of India suffered negative growth. This was much due to the fact that the transition of Indian economy from an agriculture-based country to an industry-based country was not properly devised. Soon, the Government of India realized the importance of Rural Economy in Indian Budget and it got reflected in its economic policy. The latest policy for the development Rural Economy in Indian Budget is as follows y

The corpus of the Rural Infrastructure Development Fund, to be raised to `12, 000 crore from `10, 000 crore. A separate window for rural roads will continue, with a corpus of `4, 000 crore. An additional irrigation potential of 2,400,000 hectares to be created, including 900,000 hectares under the Accelerated Irrigation Benefit Programme. The National Agricultural Insurance Scheme of India to continue for the 2007-08, with an allocation of `500 crore. A weather-based crop insurance scheme will be started. `1, 800 crore has been allocated for a water recharging scheme that will offer a 100% subsidy to small Indian farmers and 50% to other farmers to encourage them to recharge water. An agreement with Andhra Pradesh has just concluded to cover 3,000 water bodies, covering an area of 250,000 hectares. A special plan is being implemented over a period of three years in 31 suicide-prone districts in four states, involving a total amount of `16, 979 crore. Of this, around `12, 400 crore will be spent on water-related schemes. To address the problem of poor availability and quality of certified seeds, the Integrated Oilseeds, Oilpalm, Pulses and Maize Development Programme will be expanded with sharper focus on scaling up the production of breeder, foundation and certified seeds.

Government will fund the expansion of the Indian Institute of Pulses Research, Kanpur, and offer other producers to double production of certified seeds within a period of three years. The Indian Agriculture Technology Management Agency, now in place in 262 districts, will be extended to another 300 districts. The amount of fertilizer subsidy has been increased from `17, 253 crore to `22, 452 crore. The budget has also allotted `12, 000 to the National Rural Employment Guarantee Scheme Amount of `2, 800 crore has been allocated for the Sampoorna Gramin Rozgar Yojana. Allocation for promoting self -employment among the rural poor, has been increased from `1, 200 crore to `1, 800 crore. NABARD will issue government-guaranteed rural bonds to the extent of Rs 5,000 crore with suitable tax exemptions. A 31% hike in allocation towards the Bharat Nirman programme for upgrading rural infrastructure, from `18, 696 crore to `24, 603 crore, and a proposed `225, 000 crore for farm credit. In December 2006, 53,370,000 new farmers were brought into the institutionalized credit system. The target for 2007-08 is set at `225, 000 crore with an addition of 50,000,000 new farmers accessing credit. A Special Purpose Tea Fund to rejuvenate tea production. Financial mechanisms for replantation and rejuvenation will also be implemented for coffee, rubber, spice, cashew and coconut plantations.

y y

Rural poverty
Rural poverty refers to poverty found in rural areas, but more important, to factors of rural society, rural economy and rural political systems that give rise to the poverty found there. A widely shared assumption is that rural poverty in the modern era operates on somewhat different dynamics than class-based urban poverty, although social science analyses since the 'rediscovery ' of poverty in the 1960s have often tended to conflate the two. Marxism, unlike other contemporary theories of poverty, tends to write off the rural problem without further examination. (Marx referred to "the idiocy of rural life.")

Dimensions of rural poverty At the heart of every human experience is the desire to survive and prosper. To live without fear, hunger or suffering. To imagine how your life could be better and then have the means yourself to change it. Yet, every day, 1.2 billion people one fifth of the worlds inhabitants cannot fulfil their most basic needs, let alone attain their dreams or desires.

The largest segment of the world's poor are the 800 million poor women, children and men who live in rural environments. These are the subsistence farmers and herders, the fishers and migrant workers, the artisans and indigenous peoples whose daily struggles seldom capture world attention. Empowering rural people is an essential first step to eradicating poverty. It respects the willingness and capability that each of us has to take charge of our own life and to seek out opportunities to make it better. Rural poverty in India

Indias most striking feature is its diversity. The countrys population of about 1.2 billion people is composed of several ethnic groups, speaking more than 1,000 languages and following six major religions. With an annual population growth rate of 1.4 per cent, India is projected to become the most populous country in the world by 2035. With 33 per cent of the worlds poor people, 41.6 per cent of Indias population lives on less than US$1.25 a day. Based on the countrys new official poverty lines, 42 per cent of people in rural areas and 26 per cent of people in urban areas lived below the poverty line in 2004/05. Official poverty estimates for 2009/10 are not yet available, but preliminary estimates suggest that the combined all-India poverty rate was 32 per cent, compared with 37 per cent in 2004/05. India ranks 134 out of 187 countries on the United Nations Development Programmes 2011 Human Development Index a comparative measure of life expectancy, literacy, education and standards of living for countries worldwide. A total of 72 per cent of Indias population lives in rural areas, and 10 per cent of rural households are reported to be landless. Agricultural wage earners, smallholder farmers and casual workers in the non-farm sector constitute the bulk of poor rural people. Within these categories, women and tribal communities are the most deprived. About 300 million young people ages 13 to 35 live in rural areas, and most of them are forced to migrate seasonally or permanently, without the skills and competencies required by the modern economy that India is rapidly becoming. Poverty is deepest among members of scheduled castes and tribes in the country's rural areas. On the map of poverty in India, the poorest areas are in parts of Rajasthan, Madhya Pradesh, Uttar Pradesh, Bihar, Jharkhand, Orissa, Chattisgarh and West Bengal. Large numbers of India's poorest people live in the country's semi-arid tropical region. In this area, shortages of water and recurrent droughts impede the transformation of agriculture that the Green Revolution achieved elsewhere. There is also a high incidence of poverty in flood-prone areas, such as those extending from eastern Uttar Pradesh to the Assam plains, and especially in northern Bihar. Poverty affects tribal people in forest areas, where loss of entitlement to resources has made them even poorer. In coastal fishing communities, peoples living conditions

are deteriorating because of environmental degradation, stock depletion and vulnerability to natural disasters. Despite recent economic growth, poverty levels have not been reduced at the same pace. Poor rural people continue to live with inadequate physical and social infrastructure, poor access to services, and a highly stratified and hierarchical social structure, characterized by inequalities in assets, status and power.

Agricultural Reforms
Tejas: What institutional reforms can be taken to increase the role of private sector entities in the agriculture sector?

GN: There are a number of issues with respect to private sector participation. One aspect is the government rules and regulations. Either there is no legislation or there exists a multitude of legislations. Getting through these complicated set of rules is difficult and poses a big problem for private players. Even simple things like a warehouse receipt system is a complicated issue in India. Ideally there should be a legislation which helps people to come forward and offer these services with ease. Implementing legislation itself takes an extremely long time in India and even when established there is a lack of clarity which increases complexity. There is a high degree of risk involved. For example, the essential commodities act which says that at any point of time the government can actually come in and have a say on the amount of storage that is permissible for the good in question is a big demotivator for private players. The second aspect which prevents private sector intervention is that most private players want quick returns. In agriculture most of the returns come in the long term and it requires a lot of time and effort in developing the markets. There exist many new concepts like commodity markets and futures. Good quality standards are also new to people, therefore it needs enormous effort on the part of private sector players to develop such markets in order to reap any profits. For example, consider the export markets for grapes. We finally understand the market and we now know the quality standard for serving the high end markets like Western Europe. It has taken us more than ten years to achieve this. Private players are not patient to enough to wait for such long durations. Moreover if it is a small company then resources available to it will be limited and hence the individual company might not be able to put in the required effort to bear result.
Tejas: What can be done to integrate small and poor farmers who are not getting the facilities or are not able to take advantage of the existing facilities?

GN: The problems faced can be tackled along multiple dimensions. One is that government can do certain things on its own. Secondly, there should be institutional innovations like self-help groups, farmers clubs, and joint liability groups. Currently, there are some producers companies that seem to be doing alright. Groups of farmers can join together to do certain common things like procuring inputs as well as selling the produce, and even getting credit and knowledge of farming practices. In certain places, contract farming to some extent helps wherever there is labour intensive work. Quite often, it's a question of information sharing, with small farmers have difficulty in getting proper information about practices, input markets and

output markets. This can be made available through rural kiosks or common service centers. Thus the issues facing small farmers can be addressed.
Tejas: What initiatives should be taken up by the government to increase public private partnership in the agriculture sector?

GN: Legislation is one major area the government that can be looked at to improve public private partnership in the agriculture sector. APMC has been of some help in this case, but many other states will have to modify as well as clarify the legislation which has been a big hurdle. According to the APMC, you can open a private market but it is still under the APMC which often creates problems. Due to APMC inspections and regulations, how facilitating it is, is itself a question.
Tejas: How can indigenous knowledge be harnessed in the country?

GN: There are certainly some very interesting traditional knowledge networks and grass root level innovations that are already in practice such as the HoneyBee network and other networks that are trying to put them together. One thing that has to happen is to screen these innovations to see the interesting ones and then channel them through the current networks such as Kisan Vigyan Kendras(KVKs) . Once these innovations are brought to the KVKs, these technologies can be transferred to the farmers and departments. The HoneyBee network has been documenting the same and disseminating them through their newsletter. However screening of technology is important since all innovations are not relevant or attractive to all areas. Hence it is important to screen them according to the geographical area and the local context of agriculture and use it for the local KVKs to promote.

Providing Services to Farmers

Tejas: There is an increasing emphasis on the mechanization of agriculture within the country. Do you think that this could pose a serious threat to the livelihood of farmers?

GN: There is no point in protecting agriculture jobs if we want cheaper food. With NREGS rural wages have gone up including areas where there are fast growing urban centre. With higher wages there is no incentive to produce agriculture crops and so for cheaper food and cheaper agricultural produce the only option is to go for mechanization. It is correct to the extent that it releases people from rural to urban areas which require more people. Of course, there are problems associated but we need to see if its alright if food is expensive and either pay higher wages or leave it to the market to decide what food prices should be. These are difficult choices and the balancing that needs to be done involves a trade off between the long run and short run outlook. In the long run if we say its okay to have higher food prices because we assume that with the current income growth rate the per capita income will go up and food being a small part of income it is not very important. However, in the short run we cant do that because there are a lot of poor people. Hence we need to encourage mechanization. Also, it is increasingly very difficult and expensive to rear animals even in the rural areas. There are no common resources available any longer such as common forests or grazing lands so farmers have to go for confined feeding that means higher costs hence it is not feasible at all. Hence animal

husbandry is no longer feasible except the milch animals and that too in some places. With all these changes mechanization is required.
Tejas: Despite presence of banks in rural areas, latest data suggests that around 73% farmers still depend to a large extent on informal channels for credit. What are the issues that farmers face in sourcing loans from banks and what according to you could be the long-term approach for a sound rural credit policy?

GN: That's one major issue that government has to address since there has to be a long term policy with respect to credit that can allow certain amount of flexibility e.g. the government might want to waive interest rate in a drought year or come up with some formula that for a particular set of conditions the government is ready to help to a certain extent. If that is very clear than institutions can also tune their operation to that and make it easy for them to work but the major issue they face is the uncertainty with respect to policy itself. So institutions have difficulty in predicting what the policy will be and so they shirk away from credit to agriculture. Hence, they avoid it and would like to provide it only to certain enterprises such as poultry which they call agriculture since they can get back their returns quickly. All these market distortions happen because of the uncertainty with respect to government policies and therefore defining long term policy with respect to credit is very important.
Tejas: Though crop insurance has been talked about a lot in the last few years, it hasn't taken off in a big way. What kinds of changes in the existing policy are needed to promote higher access of crop insurance to farmers and what are some of the other risk management techniques that can be employed?

GN: Risk is a major factor in agriculture hence it is important to take care of the risk and how one can address it and what mechanisms will enable to address it. We have the futures market and insurance by the government. One of the most effective risk management techniques has been the MSP Minimum Support Price which has helped farmers in terms that it makes sure that the price they receive is at least the MSP. Insurance as it is implemented has its own problems like not getting the farmer his reimbursement for a long period of time which takes away its benefits. The other aspect is that all these are new institutional innovations and it takes time for people to understand the mechanism. Farmers complain that they pay every year but dont get their money back every year. They dont understand what insurance is. Hence it requires the government to come in and support it e.g. in terms of a premium payment of 5075% or subsidising the premium.

Conclusion
The critical issues in Indian agriculture are related to knowledge and infrastructure. Although there isn't a lack of initiatives and institutions to tackle these issues, we have to become better at managing big systems to achieve success in our endeavors. At the same time, we should look into new approaches like private sector participation and harnessing of indigenous knowlege to improve performance. Small farmers who are especially vulnerable to the monsoons should be focused upon and services like credit and crop insurance should be made more accessible. This will ensure that agricultural sector remains viable and caters to the country's needs.

Agricultural Reforms
1. Collectivisation and Consolidation of holdings, Co-operation and abolition of Zamindari system were given priority to bring about institutional reforms in India, after Independence. 2. Reforms to improve agriculture in 1960s: Green Revoulution based on Package technology and the white revolution were some stratefies for the same. 3. 1980s and 1990s : Both institutional and technical reforms were launched during these years comprising of schemes like Crop Insurance against drought, flood, cyclones and other Natural disasters, also steps were taken for the establishments of Grameen banks to provide loan facilities to the farmers at low rates of Interests. 4. Kissan Credit Card(KCC) and Personal Accident Insurance Scheme(PAIS) are some other schemes introduced by the Government of India for the benefit of farmers economically. 5. Special weather bulletins and Agricultural programmes for farmers have become common now a days...These are all for farmers' aquaintance with the changing weather conditions and hence are available in Radios and Televisions. 6. Minnimum Support Price and Remunerative and Procurement Prices have been annunced by the Government to protect the farmers from the exploitation of Middle Men and Speculators. These reforms have brought India to a very strong postion in the world, at least in the field of Agriculture. Today India is self sufficient in the production of food grains, and is the Largest producer of Horticulutre crops in the world, having a share of about 13% in the production of the same.

What is Rural Credit?

Rural credit is any type of lending program or line of credit that is aimed at impacting a rural population in some manner. There are banks and cooperatives that specialize in extending this type of credit to farmers and others engaged in the agricultural task. Depending on the nature of the organization, credit plans may focus on providing mortgage assistance, securing new equipment, or even funds to support research into various aspects of land development within a rural community. Individuals have access to rural credit options under certain circumstances. For example, novice farmers and ranchers may be granted a loan or line of credit to manage the acquisition and upgrade of an existing farm operation, or the establishment of a new one. Farmers and ranchers are sometimes extended credit of this type when some sort of natural disaster has ruined crops and threatens the ongoing operation of the ranch or farm. Some lenders specialize in farm loans that offer highly competitive fixed and variable mortgage rates which make it possible to

refinance a farming operation for the purpose of acquiring new machinery or meet some other pressing need relevant to the operation. Businesses can also secure rural credit under specific situations. This includes the acquisition or establishment of a commercial farming operation, or a commercial ranch. A business may also obtain funds earmarked for development, assuming that the project concerned will benefit the rural community where it is based.

In many countries, rural credit is extended under the auspices of national government programs. Often, these programs are focused on enhancing the agricultural effort within the country as a means of bolstering the economy. With government sponsorship, farmers and ranchers can often obtain resources that make it possible to sustain their productivity through growing seasons, then repay the loans once livestock and crops are sold. It is not unusual for rural credit of this type to be extended as a means of keeping a balance between imports and exports, by assuring that a certain percentage of crops and other rural products are produced domestically. Along with government funded programs, rural credit is sometimes obtained from organizations that are founded by and for farmers, ranchers, and dairy operators. Local cooperatives often provide much-needed credit to farmers and others, allowing them to receive what they need to operate their farms, effectively running a tab until the current round of crops are sold. Banks created to assist rural communities will often underwrite loans that can be used for everything from building improvements to purchasing large quantities of seeds or other elements required to produce a substantial crop. As with any type of credit option, anyone who wishes to obtain rural credit must meet the basic criteria of the lender, and demonstrate a reasonable ability to repay the amount of the loan or the funds borrowed on a line of credit.

India Rural Infrastructure

This site provides detail information on India Rural Infrastructure. The site also focuses on the objectives and activities of Ministry of Rural Infrastructure Government of India. India's economic growth and development is predicated to a large extent upon the development of its 700-million strong rural population. Majority of the population lives in about 600,000 small villages and are engaged primarily in agriculture, directly or indirectly. A substantial portion of India's current agricultural labor force has to move to non-agriculture sectors for incomes in all sectors to go up. The challenge is to manage the transition of 80% of the rural population from a village-centric agricultural-based economy to a industry based economy. Grey areas of India Rural Infrastructure y

A set of basic facts define the constraints within which the economic growth and development of India's rural population must be addressed. Fundamentally, they relate

to resource constraints, the nature of infrastructure, and the future trajectory of the geographical distribution of the population.

These services includes, at a minimum market access, educational, health, financial, entertainment, transportation, and communications. Further, services depend on the availability of infrastructure.

Infrastructure investment is irregular and inadequate to support 600,000 villages and the average cost of providing infrastructure is inversely related to the scale of the operation.

Limitations on the financial and other resources available for providing infrastructure made it impossible to provide infrastructure at every village in India. Even if they were provided at every village, it will not be commercially sustainable. The basic geographical structure of population distribution will change once India shifts from being agriculture based country to industry based nation.

The Government has launched " Bharat Nirman" for the development of rural infrastructure. Plans proposed for the development of India Rural Infrastructure are y y y y y y

Irrigation, Roads, Housing, Water Supply, Electrification, Telecommunication Connectivity.

The task ahead for the development of India Rural Infrastructure are y y y y y

To connect 66,800 habitations with population over 1000 with all weather roads. To construct 1,46,000Km of new rural roads. To upgrade and modernize 1,94,000Km of existing rural roads. Total investment of ` 1,74,000 crore envisaged under "Bharat Nirman", investment on rural roads estimated to be at ` 48,000 crore. To provide corpus of ` 8000 crore to Rural Infrastructure Development Fund (RIDF).

Microfinance and NABARD

For a better reach of microfinance program a continuous check of the status, progress, trends, qualitative and quantitative performance comprehensively is required. Thus the Reserve Bank of INDIA and NABARD has laid out certain guidelines in 06-07 for the commercial banks, Regional Rural Banks and Cooperative Banks to provide the data to RBI and NABARD about the progress of the microfinance program. There are three aspects on which the data was collected, savings of self-help groups with banks, loan disbursed by banks to self-help groups default by self-help groups repayment of the loans taken from banks. Banks also provides data regarding loans given by banks to the microfinance institutions.

Thu Feb 2, 2012 10:20 AM IST Home Opinion Op-Ed How rural' is India's agricultural credit? August 12, 2010 Pallavi Chavan

One of the most intriguing features of India's agrarian economy in recent years is the persistence of agrarian distress in many regions, even while agricultural credit flow has risen sharply. Rising flow of credit to agriculture is normally associated with buoyancy in the farm sector. A closer look at the data on agricultural credit reveals that what is termed agricultural credit may have very little to do with agriculture, the way we know it.

It is well known that the 1990s were a period of sharp fall in the growth of agricultural credit flow in India. Numerous studies and reports have argued that one of the major factors associated with the agrarian distress in the late-1990s and 2000s was an increase in rural indebtedness, especially to moneylenders. According to the All India Debt and Investment Survey (AIDIS), the share of total debt of cultivator-households taken from formal sources fell from 64 per cent in 1992 to 57 per cent in 2003. In the same period, the share of total debt taken from moneylenders almost doubled from 10.5 per cent to 19.6 per cent. In the 2000s, however, there was a reversal of the slide in agricultural credit flow. From the early-2000s, growth of credit to agriculture began to pick up. Commercial banks and Regional Rural Banks (RRBs) played a major role in the revival of agricultural credit. The revival story The growth of agricultural credit from commercial banks and RRBs, which was 1.8 per cent between 1990 and 2000, increased to 19.1 per cent between 2000 and 2007. The share of credit supplied by commercial banks and RRBs in total agricultural credit increased from 30.1 per cent in 2000 to 52 per cent in 2007. In part, the revival of agricultural credit was inspired by the announcement by the central government in 2004 that the flow of agricultural credit would be doubled between 2004-05 and 2007-08. Three distinct features of the revival story are worth noting (see R. Ramakumar and Pallavi Chavan, Revival in Agricultural Credit in the 2000s: An Explanation, Economic and Political Weekly, December 29, 2007). First, a significant proportion of the increase in agricultural credit from commercial banks was accounted for by indirect finance to agriculture. Indirect finance refers to loans given to institutions that support agricultural production, such as input dealers, irrigation equipment suppliers and Non-Banking Financial Companies (NBFCs) that on-lend to agriculture. Second, a number of changes were made in the definition of agricultural credit under the priority sector. The definitional changes broadly involved (a) the addition of new forms of financing commercial, export-oriented and capital-intensive agriculture; and (b) raising the credit limit of many existing forms of agricultural financing. To cite an instance, loans given to corporates and partnership firms for agriculture and allied activities in excess of Rs 1 crore in aggregate per borrower was considered as priority sector lending under agriculture, from 2007 onwards. These definitional changes were initiated from around the mid-1990s, during the period of financial sector reforms. According to Y.V. Reddy, former Governor of the Reserve Bank of India (RBI), coverage of definition of priority sector lending has been broadened significantly in the recent years, thus overestimating credit flows to actual agricultural operations in recent years (Indian Agriculture and Reform: Concerns, Issues and Agenda, RBI Bulletin, May 2001, p. 5).

Third, much of the increase in the total advances to agriculture in the 2000s was on account of a sharp increase in the number of loans with a credit limit of Rs.10 crore and above, and especially Rs.25 crore and above. Even within direct agricultural finance, which goes directly to farmers, there was a sharp rise in the number of loans with a credit limit above Rs.1 crore. It seems likely that these large loans were advanced towards financing the new activities added to the definition of agricultural credit. Recent data on banking has brought out a fourth disturbing feature of the revival in agricultural credit. There has been a sharp growth of agricultural finance that is urban in nature. Between 1995 and 2005, the share of agricultural credit supplied by urban and metropolitan bank branches in India increased from 16.3 per cent to 30.7 per cent (Table). The share of agricultural credit supplied by metropolitan branches alone increased from 7.3 per cent in 1995 to 19 per cent in 2005. While there was a moderate decrease in these shares between 2006 and 2008, urban and metropolitan branches continued to supply about one-third of the total agricultural credit in 2008. Concurrently, there was a sharp fall in the share of agricultural credit supplied by rural and semiurban branches from 83.7 per cent in 1995 to 69.3 per cent in 2005. In 2008, the share of rural and semi-urban branches in total agricultural credit was 66 per cent. Inside Maharashtra Let us now take Maharashtra, which boasts of strong banking development and yet is the State with the largest number of suicides by farmers. In Maharashtra, almost half of the total agricultural credit from commercial banks in 2008 was provided by metropolitan branches. Mumbai alone had a share of 42.6 per cent in the total agricultural credit supplied in Maharashtra as a whole in 2008. As a result, there has been a widening of the gap between the rural and metropolitan areas of Maharashtra in the provision of agricultural credit. Rural branches provided only 25.7 per cent of the total agricultural credit in Maharashtra in 2008. It may be argued that credit taken, whether in metropolitan or rural areas, would ultimately benefit the agricultural sector. What is missed in this argument is that an urban and metro-centric supply of agricultural credit would only benefit large corporations with their headquarters in cities and engaged in agricultural production. The actual farmer in the villages, particularly the small and marginal ones, would benefit the least from the non-rural nature of growth of agricultural credit. Regionally speaking, farmers from Vidarbha in Maharashtra, the region from where a large number of farmers' suicides have been reported, are likely to be the section that has the least benefit. The increasing concentration of agricultural credit in the urban and metropolitan areas offers a missing link in the discussion on the persistence of agrarian distress despite the revival in agricultural credit in the 2000s.

Agriculture Credit The Minister (Pranab Mukherjee) explained that to get the best from their land, farmers needed access to affordable credit. Banks had been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2011-12, he spoke of raising the target of credit flow to the farmers from Rs 3,75,000 crore this year to Rs 4,75,000 crore in 2011-12. Banks had been asked to step up direct lending for agriculture and credit to small and marginal farmers. In view of the enhanced target for flow of agriculture credit, the minister proposed to strengthen NABARDs capital base by infusing Rs 3000 crore, in a phased manner, as Government equity. This would raise its paid-up capital to Rs 5,000 crore. To enable NABARD refinance the short-term crop loans of the cooperative credit institutions and RRBs at concessional rates, he intended contribution of Rs 10,000 crore to NABARDs Short-term Rural Credit Fund for 201112 from the shortfall in priority sector lending by Scheduled Commercial Banks.

D
istrict Industries Centre

Main Activity
To develop and promote Cottage and Small Scale Industries in the district. The Small Scale Industries (SSI) means the Industries with investment upto Rs 1 (one) crore in plant & machinery

FINANCIAL ASSISTANCE SCHEMES (DEPARTMENTAL)

1) Prime Minister Rozgar Yojona (PMRY) It is a self-employment scheme for educated unemployed youth with eligibility... a) Class VIII passed b) Age 18 to 35 years (relaxable upto 45 years for SC / ST / Women / Physically handicapped / Ex-Servicemen) c) Project upto Rs 2.00 lakh for Industries/Service and Rs 1.00 lakh for Business d) Annual family income Rs 40,000/- (Max) 2) Normal Bank Finance Scheme If is one of the major schemes for setting up SSI unit. The Projects/Schemes for the purpose should have sufficient equity participation.

3) Loan Under BSAI Act This assistance is mainly for Handicrafts Sector. Limit of loan upto Rs 10,000/-. The rate of interest is 8% with a rebate of 2.5% on regular re-payment.

INCENTIVE SCHEME FOR SSI

West Bengal Incentive Scheme 2000 SSI units commenced after 01.01.2000 will be entitled for this scheme. The features of this scheme are... a) 25% subsidy on fixed capital investment (Land, Building, Plant & Machinery) b) 50% (60% in case of agro and food processing units, IT, Electronics industry) subsidy on paid interest on Bank/FI loan for consecutive 7 years and 9 years c) Remission of Stamp Duty and Registration Fee on purchase of Land or Buildings.

FACILITIES AND OTHER SERVICES

1. S.S.I. Registration a) Provisional/Temporary Registration : Before starting the SSI Unit, this registration is issued b) Permanent/Final Registration : After commencement of production of SSI Unit, this registration is issued 2. Preference for power connection Priority is given for WBSEB electric power connection to registered SSI Unit 3. Project/Scheme Vetting Project Scheme of SSI unit is vetted for technical feasibility 4. Marketing Assistance to Handicraft Products Given through participation in WB Handicrafts Expo' 5. Special Assistance rendered For setting up Haldia Petrochemicals Downstream Units. 6. National Project of Bio-Gas Development (NPBD) Construction of Bio-gas plant (family size 1-cum to 10-cum). Main usage are... a) Domestic cooking and lighting b) Production of organic manure (enriched with NPK) for better yield in agricultural, horticultural & pisicultural sectors c) Helps to maintain ecological balance. Provision of Govt. subsidy to all categories of beneficiaries 7. Pollution Clearance for SSI Units Pollution Clearance Certificate (consent for starting all categories, viz. Green, Orange, Red of SSI units) is issued on behalf of WBPCB and also the consent to operate for Green category only 8. Training Programme

Some training programmes on different trades as mentioned below are organised from time to time for prospective entrepreneurs and handicraft artisans

y y y y

Entrepreneurship Development Programme Special Training Programmes for Women/Physically Handicapped and Backward Classes (plumbing, pump-set repair, umbrella repair, batik print, etc.) Transfer of Skill and Service Centres (terracotta) Design Development/Craft Development for Handicraft Industries, Cane and Bamboo Products, Wood Carving, Solapith work

9. REGP/BSKP/Minority Loans Technical vetting of project/scheme is done here for these Extra departmental financial assistance schemes... a) REGP (Rural Employment generation programme) It is launched by Khadi and Village Industries Commission. The main features are... - Meant only for rural areas of population (less that 20,000) and for viable villageindustry projects. - Maximum limit projects upto Rs 10.0 lakhs and Rs 25.0 lakhs for institution @ 30% project cost upto Rs 10.00 lakhs will be provided as Margin Money in the form of backend subsidy after 2 years. b) BSKP: Bangla Swanirbhar Karma Sangthan Prakalpa This Scheme is promoted by Youth Welfare Department. The key features are...

i. ii. iii.

For municipal areas only Projects on industry, service & business sectors Projects upto Rs 10.0 lakhs for individual @ 20% Govt. Subsidy on the project cost

c) MINORITY: Self-employment Project for Minority Communities only. Scheme is financed and promoted by West Bengal Minorities Development & Finance Corporation (WBMDFC). The main features are...

i. ii. iii.

iv.

Age 18 to 45 years Annual family income Rs 42,142/- for urban area and Rs 31,952/- for rural areas Generation of Govt. or Semi Govt. employee upto 53 years Interest 7.5% pa

Role of DIC for the promotion of Small Scale & Cottage Industries.

1.

Technical support for preparation of Project Report. Information on sources of machinery & Equipment. Priority in Power supply/ Telephone connection. Promotion of new Industrial Estates/ Growth Centres. Land/ Shed in Industrial Estate. Approval of Project Reports of special types. Promotion of Electronic Industries. Govt. Margin Money Loan under Additional Employment Programme. Training through Entrepreneurship Development Programme.

2. 3. 4. 5. 6. 7. 8. 9.

10. Assistance under State Incentives Scheme. 11. Allotment of Raw Materials. 12. Financial Assistance under Self Employment Schemes. 13. Financial assistance through Bank/ WBFC/ WBSIC/NSIC. 14. Assistance under Equipment Leasing Scheme through NSIC. 15. Marketing linkage with Central Govt./ State Govt. organisations/ undertakings. 16. Marketing assistance through WBSIC/NSIC/CEO. 17. Ancillary Industry tie-up with Govt. undertakings. 18. Marketing information.

19. Marketing assistance through participation in Exhibitions/ Trade Fairs/ Buyers-Sellers Meet etc. 20. Marketing assistance to Handicrafts Artisans through participation in Handicrafts Expo and Exhibition inside/ outside of the state. 21. Linkage with organisations like WBHDC/ WB State Handicrafts Co-operative Society Ltd./Development Commissioners ( Handicrafts ). 22. Attending problems related to SSI Registration/ Bank loan/ Marketing of production etc.

23. Linkage with Research Institutes like CMERI/CGCRI/NML/CFTRI etc. for technology up gradation and innovation. 24. Financial Assistance for modernisation of Unit. 25. Skill development training through own workshop/ organisation like SISI, PDTC/ Coir Board/ETDC. 26. Managerial capability improvement through training, workshop, seminars. 27. Export assistance. 28. In plant study of their SSI Units. 29. Standardisation of products. 30. Sick unit Revitalisation. 31. National level awards for innovative products/ outstanding growth/ exports etc. 32. Promotion of products under Non-conventional Energy Sources.

33. Assistance under Coir development Schemes. 34. Registration of Industrial Co-operative and financial assistance to them. 35. Pollution control. 36. Assistance under scheme promoted by W.B.Minority Dev. Finance Corporation/ KVI Commission/ Board and such other organisations. 37. Single window assistance through SIDA and District Industries Centres. 38. BSAI Loan for Cottage Industries. 39. Design & Product Development for Handicrafts. 40. Awards to Handicrafts Artisans. 41. Development of Lac Industries.

42. Setting up of Bio-gas plants.

43. Linkage with Research Institutes like CMERI/CGCRI/NML/CFTRI etc. for technology up gradation and innovation. 44. Financial Assistance for modernisation of Unit. 45. Skill development training through own workshop/ organisation like SISI, ETC/ Coir Board/ETDC. 46. Managerial capability improvement through training, workshop, seminars. 47. Export assistance. 48. In plant study of their SSI Units. 49. Standardisation of products.

50. Sick unit Revitalisation. 51. National level awards for innovative products/ outstanding growth/ exports etc. 52. Promotion of products under Non-conventional Energy Sources. 53. Assistance under Coir development Schemes. 54. Registration of Industrial Co-operative and financial assistance to them. 55. Pollution control. 56. Assistance under scheme promoted by W.B. Minority Dev. Finance Corporation/ KVI Commission/ Board and such other organisations. 57. Single window assistance through SIDA and District Industries Centres. 58. BSAI Loan for Cottage Industries. 59. Design & Product Development for Handicrafts. 60. Awards to Handicrafts Artisans. 61. Development of Lac Industries.

62.Setting up of Bio-gas plants.

What are the Objectives and Functions of District Industries Centre?

The 'District Industries Centre' (DICs) programme was started by the central government in 1978 with the objective of providing a focal point for promoting small, tiny, cottage and village industries in a particular area and to make available to them all necessary services and facilities at one place. The finances for setting up DICs in a state are contributed equally by the particular state government and the central government. To facilitate the process of small enterprise development, DICs have been entrusted with most of the administrative and financial powers. For purpose of allotment of land, work sheds, raw materials etc., DICs functions under the 'Directorate of Industries'. Each DIC is headed by a

General Manager who is assisted by four functional managers and three project managers to look after the following activities :

Activities of District Industries Centre (DIC):

i. Economic Investigation ii. Plant and Machinery iii. Research, education and training iv. Raw materials v. Credit facilities vi. Marketing assistance vii. Cottage industries

Objectives of District Industries Centre (DIC):

The important objectives of DICs are as follow : i. Accelerate the overall efforts for industrialisation of the district. ii. Rural industrialisation and development of rural industries and handicrafts. iii. Attainment of economic equality in various regions of the district. iv. Providing the benefit of the government schemes to the new entrepreneurs. v. Centralisation of procedures required to start a new industrial unit and minimisation- of the efforts and time required to obtain various permissions, licenses, registrations, subsidies etc.

Functions of District Industries Centre (DIC):

i. Acts as the focal point of the industrialisation of the district. ii. Prepares the industrial profile of the district with respect to : iii. Statistics and information about existing industrial units in the district in the large, Medium, small as well as co-operative sectors. iv. Opportunity guidance to entrepreneurs.

v. Compilation of information about local sources of raw materials and their availability. vi. Manpower assessment with respect to skilled, semi-skilled workers. vii. Assessment of availability of infrastructure facilities like quality testing, research and development, transport, prototype development, warehouse etc. viii. Organises entrepreneurship development training programs. ix. Provides information about various government schemes, subsidies, grants and assistance available from the other corporations set up for promotion of industries. x. Gives SSI registration. xi. Prepares techno-economic feasibility report. xii. Advices the entrepreneurs on investments. xiii. Acts as a link between the entrepreneurs and the lead bank of the district. xiv. Implements government sponsored schemes for educated unemployed people like PMRY scheme, Jawahar Rojgar Yojana, etc. xv. Helps entrepreneurs in obtaining licenses from the Electricity Board, Water Supply Board, No Objection Certificates etc. xvi. Assist the entrepreneur to procure imported machinery and raw materials. xvii. Organises marketing outlets in liaison with other government agencies.

Small Industries Development Bank of India

mall Industries Development Bank of India ([1]) is an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises in India. Set up on April 2, 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. Current shareholding is widely spread among various state-owned banks, insurance companies and financial institutions. Beginning as a refinancing agency to banks and state level financial institutions for their credit to small industries, it has expanded its activities, including direct credit to the SME through 100 branches in all major industrial clusters in India. Besides, it has been playing the development role in several ways such as support to micro-finance institutions for capacity building and onlending. Recently it has opened seven branches christened as Micro Finance branches, aimed especially at dispensing loans up to Rs. 5.00 lakh.

It is an apex body[clarification needed] and nodal agency for formulating, coordination and monitoring the policies and programme for promotion and development of small scale industries. SIDBI has also floated several other entities for related activities. Credit Guarantee Fund Trust for Micro and Small Enterprises ([2]) provides guarantees to banks for collateral-free loans extended to SME. SIDBI Venture Capital Ltd.([3]) is a venture capital company focussed at SME. SME Rating Agency of India Ltd. (SMERA - [4]) provides composite ratings to SME.

Small Industries Development Bank of India(SIDBI)

Small Industries Development Bank of India (SIDBI) was set up on April 2, 1990 under an Act of Parliament. As on December 31, 2009, the Authorised Capital of SIDBI is Rs. 1000 crore and Paid Up Capital is Rs. 450 crore. SIDBI is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector. The Bank also co-ordiantes the functions of the institutions engaged in similar activities. Presently, the Bank provides refinance support through a network of eligible member lending institutions for onward lending to MSMEs and direct assistance is channelised through the Bank s network of 100 branch offices. SIDBI also extends financial assistance in the form of loans, grants, equity and quasi-equity to Non Government Organisations / Micro Finance Institutions (MFIs) for onlending to micro enterprises and economically weaker sections of the society, enabling them to take up income generating activities on a sustainable basis. SIDBI has initiated various schemes for upliftment of the MSME sector and continues to be the prime lending institution for MSME sector. In the Budget Announcement 2008-09, it was announced to create two funds of Rs. 2000 crore each in SIDBI-one for risk capital and the other for providing refinance on financial assistance to the MSME sector. On December 7,2008 in the package containing measures for stimulating the economy, it was announced that to facilitate the flow of credit to MSMEs, RBI would extend a refinance facility of Rs. 7000 crore for SIDBI, which will be available to support incremental lending , either directly to MSMEs or indirectly via banks, NBFCs and SFCs. In order to support the Micro and Small Enterprises (MSEs) sector, Hon ble Finance Minister in his Budget speech for FY 2009-10 has announced creation of a Special Fund of Rs.4000 crore under SIDBI. The details of these facilities are given below:
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MSME (Refinance) Fund - Following the Budget announcement by the Hon ble Union Finance Minister, RBI had set up an MSME Refinance Fund with SIDBI with a corpus of Rs. 1600 crore, which was subsequently enlarged to Rs. 3600 crore. As against Rs. 3600 crore, an amount of Rs. 3326 crore was received as on December 31,2009. The fund is to be utilized for refinancing 50 per cent of the incremental lending to Micro and Small Enterprises (MSEs) by banks. MSME (Risk Capital) Fund - Following the Budget announcement by the Hon ble Union Finance Minister to create a fund of Rs. 2000 crore for risk capital, RBI had set up an MSME (Risk) Capital fund with SIDBI with a corpus of Rs. 1000 crore during FY

2009, the balance Rs. 1000 crore was allocated during the current financial year. As on December 31, 2009, an amount of Rs. 499.43 crore has been received by SIDBI. In turn, SIDBI has sanctioned Rs. 574.53 crore directly to MSMEs and venture capital funds. Special Refinance Facility of Rs. 7000 crore from RBI - In order to enhance credit delivery to the employment - intensive MSE sector, RBI had provided further Refinance Facility of Rs. 7000 crore to SIDBI which in turn was fully allocated to public sector banks (Rs. 6390 crore) and SFCs (Rs. 610 crore). Under the above facility, as on December 31, 2009, Rs. 4726 crore was channelized through PSBs which would have increased MSE lending by banks to the extent of almost Rs. 9500 crore (refinance being 50% of banks incremental lending to MSEs) and Rs. 645 crore through SFCs. Special Fund of Rs.4000 crore - In order to support the Micro and Small Enterprises (MSEs) sector, Hon ble Finance Minister in his Union Budget speech for FY 2009-10 had announced creation of a Special Fund of Rs.4000 crore to SIDBI for refinancing 50 per cent of the incremental lending to Micro and Small Enterprises (MSEs) by banks and SFCs . SIDBI has sanctioned Rs.3800 crore to Public Sector Banks (comprising Rs.2800 crore for refinance to micro enterprises and Rs 1000 crore for refinance to small enterprises) and Rs.200 crore to State Financial Corporations (SFCs), for refinance against term loans to micro enterprises. The fund is to be utilized during the current financial year. As on December 31, 2009, a sum of Rs. 1900 crore to 10 banks has been disbursed under the Fund. Credit Guarantee Scheme for Micro and Small Enterprises - The Ministry of Micro, Small and Medium Enterprises, Govt. of India, (the then Ministry of SSI) and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Small Industry (CGTSI) which has been recently renamed as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Scheme (CGS). The scheme was formally launched on August 30, 2000. Under the scheme, credit facilities, which are extended without third party guarantee on collateral security by eligible lending banks/Financial Institutions, are covered. Numerous initiatives have been taken by the Government to enhance the coverage of credit guarantee to incentivise collateral-free lending to MSE sector. The initial corpus of CGTSME of Rs. 125 crore has gradually increased and as on December 31, 2009, it was Rs. 1906.56 crore. It is proposed to be raised to Rs. 2500 crore. During the FY 2008-09 following improvements were made in the CGS to enhance the coverage under the Scheme: Credit facility eligible for guarantee cover was enhanced from Rs. 50 lakh to Rs. 100 lakh. o The lock-in-period for filing claims against loans covered under the CGS was reduced from 24 to 18 months, to encourage banks to cover more loans under the guarantee scheme. o Guarantee coverage for loans upto Rs. 5 lakh was increased to 85%, and o Guarantee fee was reduced for loans upto Rs. 5 lakh.
o

As on December 31, 2009, guarantee approvals were extended to 2,49,164 proposals covering credit assistance of Rs. 9,192.27 crore by the CGTMSE. The enterprises

covered under the scheme employed around 24 lakh persons having aggregate turnover of about Rs. 50,000 crore. As on December 31, 2009, the membership of CGTMSE comprised 99 banks and Financial Institutions.
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Venture Capital Fund - In order to provide risk capital to the MSME sector, a SIDBI Venture Capital Limited (SVCL) has been set up, which is presently managing National SME Growth Fund for textiles, retailing, logistics, pharmaceuticals, light engineering, knowledge based industries etc. Total commitment as on December 31, 2009 by the SME Growth Fund is Rs. 467.08 crore. Earlier, SVCL has already implemented the first fund viz. National Venture Fund for Software and IT Industry ( NFSIT) with a corpus of Rs.100 crore succesfully.

What is Lead Bank Scheme?

The origin of the LBS in India can be traced to the late 60s. LBS was introduced in 1969, based on the recommendations of the Gadgil Study Group. The Gadgil group has recommended Area Approach for the development of financial structure through intensive efforts. To transform the Gadgils groups recommendation into reality, RBI set up a committee under F.S.Nariman, to fine tune the details. This bankers committee, headed by F. S. Nariman, concluded that districts would be the units for area approach and each district could be allotted to a particular bank which will perform the role of a Lead Bank. As a consortium leader, the Lead Bank would 1. co-ordinate with government office s, banks and other stakeholders, 2. undertake planning and formulation of Annual District Credit Plans through Block and District Consultative Committees and 3. help in synergizing all efforts to fulfill Plan priorities and district-specific requirements. The LBS has been able to achieve great success in the rural areas, and also it has aided in building up a cadre of Bank Officers devoted to Rural Banking. A central component of LBS is the SLBCs (State Level Bankers Committee) Meetings. These SLBC Meetings are a great tool for networking and driving the Annual District Credit Plan.

Reserve Bank of India, RPCD Department, in order to revitalize the SLBC Meetings has today (26/07/2010) issued a Notification. The Notification No. is RBI/2010-11/136 RPCD.CO.LBS.BC.No 15 /02.19.10/2010-11, dt.July 26, 2010, addressed to all CMDs of all SLBC Convener Banks. The highlights are: 1. The circular dt.26th July, 2010, is to be read in conjunction with PCD.CO.LBS.HLC.BC.No.56/02.19.10/2009-10 dated February 26, 2010. 2. State Chief Ministers may be encouraged to attend at least one SLBC meeting in a year. 3. SLBCs have been requested to arrange workshops for district administration on the recommendations of High Level Committee to review Lead Bank Scheme, in the right locations with appropriate content in order to make it interesting and relevant for District Magistrates and other stakeholders.