Indian Agriculture - Transforming a Natiion

Can Modi’s eloquence respond to farm credit vows?

Mobile Banking can show the way.

Poverty in riches and riches of the poor - both are now with the banks. The Prime Minister has also asked the bankers to see the red herring in farmers' suicides with compassion and advised passion for extending credit to the farmers. Banks should now see how their machines can be taught this human touch beyond the click of the mouse!!

http://www.mlmsoftwarezindia.com/images/mlm-mobile-banking.jpg

 “India accounts for only about 2.4 % of the world’s geographical area and 4 % of its water resources, but has to support about 17 % of the world’s human population and 15 % of the livestock. Agriculture is an important sector of the Indian economy, accounting for 14% of the nation’s GDP, about 11% of its exports, about half of the population still relies on agriculture as its principal source of income and it is a source of raw material for a large number of industries.” (State of Indian Agriculture 2013-14, Ministry of Agriculture, GoI, New Delhi)

 

Policy Brief

‘Agriculture credit is one of the main drivers of agricultural production.’^[1] Farming and credit have been highly interdependent for ages because the farmer would have his cash stashed either in soil or in silo and never in liquid form for him to spend for both production and consumption requirements. So is the case for credit at any cost and anywhere for the farmer. This is where the roots of money lender lie. He sits in the village close to the farmer.

Efforts at institutionalizing money lender started with the starting of primary cooperative agricultural credit societies. Post nationalization, nationalized banks, regional rural banks took to agriculture lending in a big way. NABARD was established in 1982 to accelerate productive agricultural credit flow with focus on improving the lot of the small and marginal farmers.

Post liberalization, with India becoming an important constituent of the WTO, Agreement on Agriculture and Market Access has also witnessed diversification of agriculture and rural economy. The wide ranging definition of farming encompassing dairy, poultry, piggery, fisheries, and all animal husbandry and horticulture activities led to inadequacies and delays in extension of credit from institutions. Public sector banks are mandated to extend credit for agriculture that now includes agro-industry and agri-businesses up to 18 % of the total credit.

Cyber Risks

http://www.moneylife.in/article/the-threat-of-increasing-cyber-risks/40639.html?utm_source=PoweRelayEDM&utm_medium=Email&utm_content=Subscriber%2320149&utm_campaign=Daily%20newsletter%2027%20Feb%202015

Hyderabad City Police commissioner in a press conference recently revealed that the city police registered 21,035 cyber crime cases in 2014 as against 19,011 in 2013 and 18,744 in 2012. A near ten per cent rise in just two years is a cause for alarm. The rise is attributed to the large scale use of technology and mobile phones.

Social media contributed significantly with the uploading of fake woman profiles, online payment frauds, blackmailing, hacking, skimming, identity theft and data theft etc. The police are trying to use technology again to track and trace the criminals. Global trends are no different although it cannot be a solace.

Budget Discussion - 1

: http://www.livemint.com/Politics/wpg7fODtc18aM2xVgANViP/Why-India-needs-a-new-fiscal-policy-framework.html?ref=newsletter&utm

My response to the above article is as follows and can also be seen in the Livemint discussions: 

GDP in itself is a poor indicator. It escapes several areas of income in the aggregation that has become the springboard for black money. For instance, all the waste and scrap dealers till date in all the cities deal only in cash. Several jewelry merchants take only self cheques from their clients and not account payee cheques. Several doctors doing private practice do not ever, ever give any receipt for the consultancy. Several leading advocates are no exception. Like this many areas still escape our GDP. All the ratios depend upon such aggregation as GDP suffer credibility.

Second, India's prism of planned economic development rested on the tripod of politics, poverty and patronage. We have traveled a long way from the erstwhile socialistic pattern of society. But inequities still persist. 

Areas which are the essential domain of public expenditure - universal education, health, safe drinking water and good sanitation moved to private or public-private domain. It is time that the government looks at what are its key responsible areas and provide resources adequately with periodical monitoring mechanisms as part of the Budget.

All the laws impacting on state finances should be subject to Regulatory Impact Assessment annually and the relative Report should be presented to the first session of the Parliament for discussion and modification.

Once these are done, the fiscal responsibility budgetary management exercise becomes simpler. The country is currently in transformation phase and this is the right time to plug all the loopholes in the existing system of monetary and fiscal management. 

It is good to recall John Stuart Mill: "It must always have been seen more or less distinctly, by political economists that the increase in wealth is not boundless: that at the end of what they term the progressive state lies the stationary state.."

Governance Reforms Imminent

Budget Hopes and Hypes

Fiscal balance

Union Budget 2014-15 was more on aspirations. It had to address the legacy issues. But 2015-16 Budget in the wake of series of policy announcements by the NDA government during the last nine months has promised to be progressive and inspirational. The recent statements of FM leave more expectations on this count.

Notwithstanding the hope of the World Bank President the dragging growth in farm and manufacturing sectors is still a matter of great concern and this led to pragmatic low pitch by the RBI at 5.5-5.7 percent growth at the end of this fiscal.

Inflation has come down but the fundamentals are still weak; gross domestic savings has not improved markedly; credit has not picked up. The domestic food and vegetable prices are yet to record the type of decline that would give confidence to the RBI to tame further the lending rates.

The 14^th Finance Commission handed over its Report to the President. Once it is tabled in the Budget session, the new formula of dispensation of resources among the States and Union and between the States and the sub-states would lead the budget formulations.

Expectations on the Finance Minister:

Ten Point Agenda for MSMEs in Brand India way

New Year leaves many in hope with the MSMEs no exception. Their share in GDP at around 8% currently has prospects of moving to 15% by 2020 according to a KPMG-CII Study in October 2014. Hopes are built on the double digit growth of a few manufacturing sectors by that time and the FDI interventions in defense, pharma and infrastructure sectors. Not so encouraging, however, is the decline in credit growth in the manufacturing sector from 13.7%  a year ago to 7.3% in December 2014.

The Government has no doubt infused some confidence building measures, like a few start-up Funds for SC entrepreneurs, revisiting the definition of the MSMEs and credit policies. Action seems to be far slower than announcements. Even earlier there were 32 Funds announced for the sector at different points of time that did not create the impact one would expect.

At least ten things need to be done by the Government if the MSMEs should move to building brand image for India and they will be all in any case, Make-in-India only.

New Year Bites 2015

For the New Year:

Year 2014 can be termed as year in waiting. People waited with bated breath for the policy paralysis to end and for the economy to start growing to its potential. Post elections, the wait did not however end. There have been announcements more than achievements and promises more than performance. 2015 would therefore be a demanding year for the rulers.

The crude shocks elsewhere brought some cheer to India in containing its current account deficit and inflation that touched unsustaining levels in March 2014. Stock markets reacted favourably with the indices taking the highest ever jump of 6000 since the last General Elections. They shocked the investors with a peak in the crash on the 7^th January 2015 led by yet another decline in global oil prices and other commodity prices.

Banking on cooperatives is better business

Cooperatives are wealth creators:

The need for cooperatives in wealth creation arises mainly due to the reason that a cooperative can create more value or surplus than the individual can. Conceptually, if a cooperative is well run, it will bring more benefits to its members. The organization and management of a cooperative enterprise, however, is complex. It is more complex in the case of rural cooperative credit structure as (1) this structure is part of the overall financial structure and has a contributory responsibility to the financial stability (2) it has to abide by the regulatory policy and procedures and (3) its capital structure demands continuing infusion of capital under Basel III.