According to the State Bank of India's Economic Research Department (ERD), farmers' income increased by 1.3–1.7 times in some States (such as cotton in Karnataka and soyabean in Maharashtra) and by two times for some crops in FY22 compared to FY18. The ERD examined primary data of SBI's agriculture portfolio across States and reached the aforementioned result.
According to the report, it's interesting to note that farmers who cultivate non-cash crops like wheat, rice, maize, and millets have seen a smaller gain in income than those who plant cash crops like tea, coffee, sugarcane, cashew, and rubber.
Along with agricultural income during the same timeframe, allied/non-farm income significantly increased by 1.4–1.8 times in the majority of States. This supports the trend found in the 77th National Sample Survey, which found that sources of farmer income other than crops have gotten more varied.
"Agricultural policies are ushering in a greater tomorrow," the report concluded, "with a greater than 1.7 times boost in farmers' income since FY18, a statistically conclusive upward shift in mean income, and no significant change in income disparity." The Minimum Support Price (MSP), which has climbed 1.5–2.3 times since 2014 and is increasingly aligned with market-linked pricing, has been crucial in guaranteeing the transmission of higher prices to farmers, according to Soumya Kanti Ghosh Group Chief Economic Adviser, SBI.
According to him, this has resulted in an ideal price discovery that has established "floor price benchmarks" for 23 different crop types, encouraging farmers to gradually switch to crop varieties with higher yields and values.
Waiver Of Farm Loan
According to Ghosh, despite much hype and political favouritism, farm loan waivers by States have not been able to provide relief to the intended subjects, destroying credit discipline in some regions and making banks and financial institutions hesitant to continue lending.
Out of the approximately 3.7 crore eligible farmers, only about 50% have gotten the loan waiver money from 2014 (until March 2022), however in other States, more over 90% of farmers have received the debt waiver sum. Essentially, a "self goal" that the State imposed on its citizens, Ghosh exclaimed.
Agri-Livelihood Credit Card
The ERD advised making repayment of interest alone the main goal of the regulator and simplifying the rules for "review/renewal" of Kisan Credit Card (KCC) loans.
Additionally, banks' increased use of technology (such as using satellite imagery data to monitor crops in real time or using third-party approved agents to submit field inspection reports via video-calling facility and separating the review from the core banking system by making it app-based through digital channels) will ensure prompt "review and renewal" procedures.
The ERD proposed launching an agri-livelihood credit card (LCC) that would function initially in tandem with KCC and include a multi-purpose loan (with overdraft/revolving credit up to Rs. 1 lakh).
By assuming that there are 10 lakh beneficiaries and that each receives a loan of Rs 50,000 on average, a total of Rs 5,000 crore in loans will be disbursed per year, further boosting rural demand.
Agri-Credit Guarantee Fund
Additionally, if loans are guaranteed by credit guarantee schemes, the covered amount will have zero risk weighting. The ERD suggested creating an omnibus Agriculture Credit Guarantee Fund Trust-Agri and Allied Sectors (CGFT-AAS) under the aegis of CGTMSE, which could exponentially increase new agricultural lending and give financial intermediaries the assurance to consider agricultural proposals without worrying about the accumulation of sticky assets.
Considering that the proposed CGFT-AAS would have an initial corpus of 5,000 crore and an average leverage of 15 (to be enhanced appropriately thereafter), the total amount of new loans that can be guaranteed by this fund will be 5.25 lakh crore.
