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NEWSBLOGSBUSINESSECONOMYFinancial Inclusion: On the path of realization

ECONOMY

Financial Inclusion: On the path of realization

July 29, 2022, 11:15 AM IST B. Yerram Raju in Fincop, Economy, India, TOI

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B. Yerram Raju

Dr B. Yerram Raju, Ph.D., from Andhra University is a banker turned economist having worked with the SBI for nearly three decades. He was Senior Faculty and Dean of ASCI for n ... MORE

In a recent interview to prof. Nicholas Stern in New Delhi, PM Modi emphasised the need to rethink on development beyond the narrow economic and financial sense and more holistically about sustainable, inclusive, and resilient growth that includes human development.

In this brief article, it is proposed to review the financial inclusion efforts in the light of RBI Annual Report 2022.

In a blog put out by the World Bank (worldbank.org/all about finance/blog) inflows and usages illustratively affirms the achievements of financial inclusion, mentioning that 71 percent of adults in developing economies have an account.

RBI constructed a composite Findex and tracked the milestones of financial inclusion and financial learning. 2021 agenda is a continuation of the effort in financial inclusion from 2005.

The real instrument for giving a big push came with the opening of Jan Dhan Account, introduction of mobile link to the accounts through Aadhar (JAM), opening no-frills accounts were all the initiatives of the Government in the financial sector, that the RBI cannot take credit for. The single factor responsible for India ranking high in financial inclusion is technology, low cost network availability and easy availability of mobile phones that include smart phones. 2.5lakh villages have been provided broadband connectivity.

Payment options became easier and convenient, thanks to the National Payment Corporation of India’s Unified Payment Solutions (UPI). Every Bank started mobile instrumentality for payment solution followed by NBFCs and FINTECHs.

All this was possible because of the aggressive efforts of the government in ensuring digital penetration that saw street vendors taking payments through the PAYTM QR code. Out of 140crore population, 110crore use mobile phones. 6.8crore have bank accounts and 64.67 percent use omnichannel for their online spending. National E-governance Division’s Rapid Assessment System, Public Fund management, Single Nodal Account, and Bharat Bill Payment System (NPCS-owned) ensured that the Direct Benefit Transfers to the farmers, pensioners and others receiving incentives reached in time.

Government of India and RBI together have saved the cost of delivery of incentives and reduced corruption at the delivery points of the government benefits. It annulled the statement of Rajiv Gandhi once made mentioning in a meeting in Orissa that only 16 percent of the intended benefits under the government schemes reached the intended. Yet, ‘the task of financial inclusion is onerous, but is, by no means, insurmountable’, to quote Deepak Mohanty’s Financial Inclusion Committee Report of Deepak Mohanty.

Shaktikant Das as Governor took the initiative of putting in place a national strategy for FI that included building a composite index for financial inclusion, FI-INDEX. According to RBI Annual Report, 2022, “The annual FI-Index for the period ending March 2021 stood at 53.9 as against 43.4 for the period ending March 2017, capturing the progress made in this area. The FI-Index will be published annually in July every year.” It also claims a number of initiatives taken towards strengthening financial inclusion.

According to the Report, the key achievement under NSFI during the year was ensuring the availability of a banking outlet within a 5 km radius of every village/hamlet of 500 households in hilly areas, in 99.94 per cent of the identified villages. Data in the Annual Report shows that village branches came down by 2751 during the calendar year 2021. Business correspondents (BCs) in villages with population below 2000 also came down by 18,429. Banking outlets in villages in other modes also came down by 922. Thus, the reach to the people in general suffered during this pandemic year.

Its efforts in financial learning through Centers of Financial Learning and workbooks on financial literacy through schools for classes VI-X initiated by Duvvuri Subba Rao as RBI Governor, seem to have laudatory effect going by the increase in the number of Basic Savings Bank Accounts both online and offline.

Disappointing Credit

Credit as medium of financial inclusion leaves several gaps to conclude that the FI-Index increase reflected reality. Priority sector credit, by itself, is no clear indicator of financial inclusion in as much as number of accounts does not reflect the number of either farmers covered, or number of micro and small enterprises covered. There is no data in the report on the number of marginal, small and tenant farmers financed. Priority Sector Lending Certificates (PSLCs) is a shadow achievement in the sector while the window from Small Finance Banks (SFBs) to NBFC-MFIs and MFIs (Trusts and Societies) could reflect true inclusive finance reach expansion as the per capita lending to their clients cannot exceed Rs.25lakhs. Details of E-Negotiable Warehouse Receipts do not give data on the reach of this instrument to the marginal and small farmers. The number of KCCs are part of agricultural credit total given in the priority sector dispensation.

Deepak Mohanty Committee felt that MSMEs are the best vehicle for inclusive growth, job creation and poverty alleviation. While the poverty has been reduced to 15 percent in 2021 according to the OECD report from 26 percent a decade ago, notwithstanding various policy support measures for MSMEs, access to adequate credit still remains elusive for them as revealed by the following table.

RBI reasons out that the decline in number of accounts is due to mandatory registration by Udyam portal of the Ministry of MSME, GoI. Each enterprise can have more than two accounts, both under the category of investment credit and working capital credit. After Atma Nirbhar Bharat Abhiyan, the number of accounts may have gone up for the same enterprises!! The rationale therefore looks peculiar as there is no mention of the number of enterprises financed by the banks but only number of accounts.

Looking at the increase in lending to micro and small versus medium-sized enterprises, it would be presumptuous to say that banks efforts towards financial inclusion have been exemplary. The other instruments of inclusion are MUDRA loans, loans to street vendors, and the extent of credit guarantee scheme as measures to accelerate credit to the micro enterprises and these accounts are all part of the micro category in the table. It is not, however, clear about the number of manufacturing micro and small enterprises financed.

The most significant effort of the RBI is expansion of the CFL project by setting up 1,199 Centers for Financial Literacy (CFLs) covering 3,592 blocks across the country and increasing financial education levels across the country. The other significant achievement is in the area of strengthening digital infrastructure by way of institutionalising the Payment Infrastructure Development Fund (PIDF), launch of Digital Payment Index (DPI), implementation and scaling up the pilot project on expanding and deepening of digital payments ecosystem and laying of Optical Fibre Cable (OFC) under the Bharat Net project of the Government of India (GoI) to provide broadband connectivity to all 2.5 lakh Gram Panchayats across the country. The Sachet Portal covering all the regulators as a grievance redress mechanism does not have any data to support the claim in the Report.

IV.1 Cooperative Banks both in the urban and rural areas have a significant capacity to enhance the financial inclusion effort and they should be supported through counselling, mentoring and follow-up by the regional offices of the RBI.

IV.2 The outcome is good, but the output requires much more effort at the ground level, both by the commercial banks, Regional Rural Banks, SFBs, and BCs. It is high time that RBI improves the data on financial inclusion efforts more in terms of number of persons than in terms of number of accounts.

IV.3 The author is a former senior banker, economist, and risk management specialist. The views are personal.

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Views expressed above are the author's own.

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BLOGS BY B. YERRAM RAJU

• Privatisation of banks: Reversing the history
• Responsibility and responsiveness
• Government patronage and institutional apathy for senior citizens run parallelly

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Privatisation of Banks - Reversing the history

 

Privatisation of Banks – Reversing the History

Good economy and bad banking can never go together. But will privatisation usher in good banking? Why at all the banks that were once private, were nationalised in 1969 and later liberalised in 1991? These are some questions that occur to any customer of a bank when he sees that the union government would like to privatise the nationalised banks by amending the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 in the monsoon session of the Parliament.

1970 Banking Act required the union government to hold at least 51 percent of equity. When Mrs Indira Gandhi overnight nationalised the banks in two bouts – first in 1969, fourteen and second in 1980, six banks with different capital thresholds, it was just not a political move. Banking as a public good, was not within the reach of millions, more particularly, the neediest, in the rural areas then.

When the first stage of reforms started in 1991, nationalised banks were found to have achieved the expectations, ushering in barefoot banking and phenomenally improving the reach through the Lead Bank Scheme and Service Area approach,  al bait at the cost of efficiency. The reforms helped cleaning up the banks’ balance sheets, introduced asset-liability management, prudential management, and better and responsible customer service. Within fourteen years, they became symbols of inefficiency reflected in large accumulation of non-performing assets (NPAs).

Inclusive banking approach, post 2005, led to the creation of banking correspondents (BCs), Small Finance Banks, Small Payment Banks. While in 1991 there were 76 scheduled commercial banks, excluding the regional rural banks and urban cooperative banks, the comparable figure now is 93.

From 60,220 total bank branches in 1991 – 35,206 rural, 11,334 semi-urban, 8,046 urban and 5,624 metropolitan branches, the total grew in 2022 to 158,373 (rural branches -52,773, the least to grow, semi-urban-43,683 branches; urban branches- 30,638, and 31,279 metropolitan branches). On average a branch covers 9,500 persons now against 14,000 in 1991.

Businesswise, the banks had Rs3.8 lakh crore deposits and a Rs1.32 lakh crore credit portfolio. Three decades later, the deposit portfolio is over Rs155.7 lakh crore and credit portfolio, Rs108.8 lakh crore. Credit – deposit ratio in terms of percentage scaled up from 34.2 to 69.88, that is more than twice. The cash reserve ratio or the portion of deposits that commercial banks keep with the central bank was 15% in 1991, as against 3%.  RBI ensured more liquidity in the hands of the banks to lend responsibly, while answering the needs of the society.

Banks have been given freedom to charge interest rates to different categories of the borrowers based on their risk perception. The core content changed in the banks. Although technology took the front seat, cost of banking went up over the years. During the last eight years, Jan Dhan accounts brought more than 43 crore persons into the fold of banking.

The decadal data between 2000 and 2020 indicates growth in advances in both private and public sector banks and their NPAs too. However, to expect banks to lend without NPAs will be amounting to calling on banks to give up risk appetite. Also, creating mega banks and Bad Bank would extinguish neither their toxic assets nor reduce their losses. The government ignored the experience of the 2008 recession that warned ‘too big to fail’ banks would demand more resources from the exchequer than earlier, when they created the monolithic SBI and merged major PSBs to be just ten now from 28 in 1991.

Private banks, foreign banks, and PSBs are not on par in the eyes of the regulator when it comes to meeting the priority sector obligations. While agriculture, small industries and small businesses, housing for the poor, education for the poor and transport including boats and catamarans were the priority sectors post-nationalisation, their composition and content changed dramatically during the last thirty years. Indian Banks Association, the lobbying agent for the banks, negotiated for redefining the priorities from time to time. The forty percent of total lending earmarked for this purpose is diluted for the poor and disadvantaged – the very purpose of prioritisation.

Shaktikant Das, RBI Governor, speaking at Ahmedabad University in 2019, recalled the status of banking pre-nationalisation:

“Five cities in the country, viz, Ahmedabad, Mumbai, Delhi, Kolkata, and Chennai accounted for around 44% of the bank deposits and 60% of the out-standing bank credit in 1969. This led to the widespread political perception that, left to themselves, the private sector banks were not sufficiently aware of their larger responsibilities towards society.” Quoting RBI’s History of Banking Vol III, he said, “nationalisation of banks was thought of as a solution for greater penetration of banking that excluded 617 towns out of 2,700 in the country. And, even worse, out of about 6,00,000 villages, hardly 5,000 had banks. The spread, too, was uneven… ”

The 2008 recession also led to demand for nationalisation in the UK, Australia, and the US to save the interests of the depositors and bondholders. The very purpose of nationalisation — namely, serving the unbanked and under-banked — is yet to reach its frontier. Financial inclusion cannot afford the luxury of complete privatisation. In fact, coexistence of private and public sector banks will lead to a healthy competition if governance issues in PSU banks are adequately addressed.

It is wise to turn the pages of reforms suggested by the Narasimham Committee-II and reiterated at Gyan Sangam-1 (Retreat for Banks and Financial Institutions), that the government would do well to provide full autonomy to PSU banks, not interfere in transfers and postings, and issue of loans. Behest lending should stop with setting goals by the RBI. Owner cannot be regulator. It can at best be a supervisor to ensure their healthy functioning. Government seems to have realized that its capacity to supervise is highly limited and therefore, it would be better to give up such responsibility. It must have also realized that its ability to improve governance in PSBs has reached its limits.

However, there is no evidence that all is well with the private banks, and they can deliver better to the people the banking requirements than PSBs.

The present government gives the impression that growth comes from the rich and the rich do not cry on inflation. They can pursue non-inclusive growth agenda more effectively if they change the institutional architecture, so that expenditure on institutions meant for delivering to the poor can be minimised, if not eliminated. This is undesirable both politically and economically. While privatisation by itself is not bad, the timing and motive behind the move at the moment, are suspect, particularly after the consolidation of PSBs took place.

The views expressed are author’s own. The author is an economist and risk management specialist.

https://timesofindia.indiatimes.com/blogs/fincop/privatisation-of-banks-reversing-the-history/ published on 30.06.2022

 

Responsibility and Responsiveness

Responsibility and Responsiveness

Thanks to WhatsApp, if you put two blue ticks on the message, it can be a mere acknowledgement that the reader has seen your message. It does not mean that he or she has read the message. Similarly, your mailers also get responses. Today, most institutions tagged their grievance redress system to technology. Its implications should be seen to be believed. This blog addresses a few common occurrences in that direction and the best that could be done, if the system has to improve.

My friend went to his bank branch to enquire about a transaction that he did not originate. At the counter he approached, he gets a response that he would verify the system and tell him. He confirms that the transaction reflected was correct and that the system says so. If he has any further clarification to seek, he may contact the Manager. The Manager directs him back to the Accounts Manager, who confirms the response of the first counter clerk. He is directed to lodge a complaint on the bank’s website. One is dismayed at the responsibility of the officials. Is this unique to a branch or a bank? This is universal.

When you lodge a complaint to a bank or a Company or a mobile operator or a NBFC, you will receive a message on either your email or mobile phone that ‘Your complaint has been received. It will be responded to within 24/48 hours as the case may be.

When you would like to complain on the website on the contact point, you will be directed to record your complaint on a series of options that the institution chooses to address that may not reflect the concern you may want to raise with that institution. When you click on ‘others’ option, it restricts your message not to cross 100 words in most cases. You should have learnt precis writing in your school days. You are asked to enter the captcha. After repeated attempts, you may succeed, if you are lucky. You wait for the declared time only to receive another message that the complaint has been referred to the concerned official from whom you will receive a response shortly.

In case you are disappointed and try to reach to the Chairman/Managing Director/CEO, you would not have received even a simple acknowledgement. Remember, this top executive at least  three or four personal secretaries of sufficient seniority in the organisation and that does not help the response system.

Government departments are a shade better if the grievance is addressed in person or manually. If you use technology, the templated response system gets activated and is no different from the financial or non-financial institutions.

We often hear of the remarkable success of the technology in improving access to the citizen. If you are tech-savvy, you may do all transactions using network you work with. The digitalized world has enabled smart phones to do all that anyone does manually. Your smart watch records your blood pressure, water or coffee intake, number of steps you walked, and you have any problem with either your mobile phone or the smart watch, there will be very few lucky who get their complaint redressed.

Technology has enabled many to benefit immensely that include myriad of fraudsters. The frauds in financial institutions today are in millions and are mostly unrecoverable. A recent post in Money Life blog mentioned that during the last ten years bank frauds touched Rs.5096crore of which only Rs.127cr could be recovered. There is no record of cyber frauds with the regulator!!

I recall Sadguru Jaggy Vasudev’s definition of responsibility: ‘Ability to respond.’ He adds: “Responsibility is not compulsive action; it offers you the choice of action.”  In several cases, such action is missing although choices are visible. Responsiveness is the willingness to respond coupled with ability. Willingness to respond exists sparsely and therefore, one notices the inaction on the part of institutions against several types of grievance. Many grievances as a result, reach the courts of justice. Several complaints may not have cognizable evidence and so, even genuine complaints have the chance of being treated as frivolous. Where does the remedy lie?

Entire grievance redress system in all departments with citizen interface, should be evaluated if the nation were to really commit to ‘ease of doing business’ and making our democracy work in the best interest of the welfare of the citizen.

 

https://timesofindia.indiatimes.com/blogs/fincop/responsibility-and-responsiveness/

  

Pensioners of SBI need redress

 

Government patronage and Institutional apathy for the Senior Citizens run parallelly

B. Yerram Raju*

I am 80 years old and retired from the country’s biggest Bank, State Bank of India as a Regional Manager in 1994. I read with great interest the story put out by the Economic Times today from the horse’s mouth – the Minister.

The synopsis of the story in Economic Times of 11^th June 2022 attracted me most. India has 8.6 percent of the globally aged and such population is likely to move to 19 percent by the end of 2050.

Despite Article 38(1), 39 (e), 41 and 46 making it incumbent on the states to provide public assistance at the old age, mysteriously, lot many cases are hibernating in different Courts of justice, with Supreme Court, no exception.

Nearly ten thousand senior citizens who retired between 1991 and 1997 from the SBI, that include the Chief General Managers to Assistant General Managers, draw a measly pension of around Rs.28,000 per month, including Dearness allowance. With inflation now, their savings are getting negative returns. A few facts need public attention.

1.      Government appointed a Committee with Murmur as Chairman, and its report is still not implemented. Murmur Committee had recommended that the basic pension of Rs.4250/- has to be converted to Rs.7120/-. The eighth Bipartite retirees were paid pension on pay scale of eighth Bipartite from 01.05.2005; that is, those who retired between 01.11.2002 to 30.04.2005 were paid pension on old scale of Rs.4250/- whereas earlier seventh Bipartite Retirees were already paid pension of Rs.7120/-. This anomaly arose because of the policy of discrimination followed by the SBI and IBA while settling the issue of pensioners of earlier era.

2.      D.A. Formula – In the old Scheme D.A. on Pension was paid on Structured basis. With eighth Bipartite Salary Structure the System of 100% neutralization was introduced. Only 5th, 6th & 7th Bipartite Retirees are paid Structured D.A. The Federation submitted that when 100% neutralization has been accepted and introduced why deprive old Pensioners from this benefit? A small number of such retirees have survived, and it is not going to cost huge expenditure to the Bank.

3.      Commutation factor in SBI: The SBI retirees suffer double loss. The factor which is available in other Banks at the age of 70 is offered to SBI Retirees at the age of 60. As it is all the official get 40% pension. They, therefore, suffer double loss. We emphasized that Ministry should issue directives to provide commutation as per Industry Level norms to SBI Retirees.

Every effort made by the Federation of SBI Pensioners’ Association and even some individuals could not resolve the issue of the rise of basic pension from Rs.4,250 per month to the level obtaining in 2005 even after a wide range of discussions with the Indian Banks’ Association, SBI, and Department of Financial Services, Government of India. SBI has huge pension fund balances. Resources are not the issue for resolution.

Two questions become prominent here: 1. Despite SBI, a statutory institution set up under the SBI Act, having enough resources to raise the pension to such group, why should the bank look to the approval of DFS, GoI? 2. Why the DFS could not take the route of arbitration and conciliation instead of procrastinating the issue in the name and style of ‘matter is sub-judice’ when they were requested for approval, on the ground that a few individuals, seeing no easy solution raised the case with the Courts?

We not merely look forward to a peaceful and healthy life but also a life of dignity and honour. Government of India should bring in the issues of old age and pensions of statutory institutions under the ambit of the Department of Administrative Reforms, Pensions, and Pensioners’ Welfare to direct the institutions concerned to settle such matters through its arbitration not withstanding the cases in the Courts. Courts, to my knowledge and understanding, will be too happy if the parties come to a compromise and withdraw the cases.

National Policy for Older Persons (NP0P) should encompass all the older persons irrespective of the affiliation to a PSU and Atul Vayo Abhudaya Yojana that acts as umbrella for all government-aided schemes for the elderly, and SAGE would be meaningful instruments when their applicability is universal.

Department of Financial Services, GoI should confront a problem head-on and should have timelines for resolving the cases relating to pensions in PSBs and SBI lest many aspirants of justice get resolution only when they reach the grave. Let these hapless old age citizens – in the age group of 75-90 years, get relief sooner than later.

The views are personal.

https://timesofindia.indiatimes.com/blogs/fincop/government-patronage-and-institutional-apathy-for-senior-citizens-run-parallelly/

Published on 11.6.2022

 

Is risk management cost or revenue function?

 

Is Risk management a cost function or revenue function?

B. Yerram Raju*

Ever since enterprises and firms as well as banks and financial institutions got a hang on risk management function, two things happened. One, most viewed it as a regulatory imperative and felt that compliance is firm’s major responsibility. Two, when the enterprises started practicing risk management, it became more its risk culture than a regulatory function. Broadly, all the enterprises, banks and financial institutions realized that we continue to live in a complex and uncertain world despite improvements in technology and data collection. However, not many institutions realize that costs incurred on setting up good risk management practices would enhance their revenues even in the short term. How? Certainly not through mere data collection, and modelling.

The current year and the years ahead seem to pose as many challenges as opportunities and there will be many more border level institutions like the non-government organizations (NGOs) coming to interplay with the rest of the enterprise sector. It is difficult to predict or control with a degree of certainty the future, climate change, environment and social governance would bring together private players and NGOs.

For example, during the pandemic, health of individuals in organizations, migration of individuals from the enterprises to their homesteads out of fear of the outbreak of Covid-19, resettlement of people, work from home and its tracking exposed new risks and there are no models built for tackling such risks. But the enterprises developed common sense based approaches initially to combat them. Governments stepped in with fiscal, financial, and non-fiscal support measures and the whole world evolved coping mechanisms.

Many nations came to conclusion that it is better to learn to live with those risks and cope with them than running away from them. Supposing that it is a cost function, can these risks be managed without incurring them? If they are not incurred, sustainability of firms would be in grave danger. The profit curve dented but loss is minimized. and many firms could bounce back to normalcy in a few nations like India. China, continuing its lockdown as a higher risk mitigation suffered the risks of sustenance and growth.

Pandemic, more than the recession, taught risk managers the lesson that risk management is a revenue function. Further, it also taught us that such risks in the short term will also turn out as opportunities. India became the vaccine producer for the world. Pharmaceuticals, packaging and packing industry and goods transportation have seized the opportunity for growth on a sustainable basis.

E-commerce firms of various hues, that started as small ventures, became big. Food delivery firms like Zomato and Swiggy showed that it is yet another business opportunity in the waiting for many. Several cafes closed only to give space for several households to become food producers to deliver through e-commerce firms. A sea-change occurred in the firms’ growth path.

Cristian deRitis in an optimistic discourse on GARP, says: ‘How much effort we exert to avoid a negative outcome depends on how highly we discount the future. The higher the discount rate, the lower the value to us of avoiding a loss in the future.’

A unified theory of risk management would enable cohesive and integrated risk management function. Persons good at credit and operational risk would realize that they should enhance their knowledge into all other forms of risk to enhance the value of the firm. Such unified theory of risk management provides for better risk identification and assessment capabilities across the geographical spaces and the spaces between the credit, operational, market, reputational, and sovereign risks.

Enterprise Risk Management (ERM) of firms have to develop, train, and cultivate risk management techniques easily understandable to each of the staff and other stakeholders to enable risk culture to thrive and flourish in the organisation not just confining to the cabins of risk managers and chief risk managers. A realisation has to come that risk management enables growth of profit. It is an investment and not cost. The net result would be effective risk culture and governance.

*The author is an economist and risk management specialist and the views are personal.

https://timesofindia.indiatimes.com/blogs/fincop/is-risk-management-a-cost-function-or-revenue-function/

 

 

Bright Future for Indian Agriculture But Reforms Imminent

 

Future is bright for Indian Agriculture – But Reforms Imminent.

B. Yerram Raju*

Agriculture is one sector that takes all the four factors of production – land, labour, capital, and organisation/management - in full measure, and consumes the scarcest resource water additionally. Several limitations surround the future of agriculture. Land is limited and there are several claims from dwellers to industrialists. So is water and capital. Management depends on the absorption of the latest technologies.

India has only 4 percent of world’s wate resources. Its present population of around 1.39bn is likely to escalate to 1.69bn according to population experts. Improving (a) water resources’ optimization, (b) productivity of the small holdings that constitute 50 percent of the arable land, (c) technologies unique to the production systems of India, (d) integrating all types of agricultural activities and (e) resilience to climate change, is imperative.

India’s agricultural growth (1950-2020) can be seen in many areas: the second largest horticultural production in the world; the highest milk production in the world, witnessing twelve-fold growth; the second largest fish production in the world. It is now a net exporter and its agricultural production is 44 percent higher than that of the US. According to Praveen Rao, Vice Chancellor, PJTS Agricultural University, Hyderabad, India’s agricultural GDP rose from US$ 15bn in 1960 to US$101bn in 2000. During the next sixteen years, the growth was 350 percent more than that registered during the preceding thirty years.    

A.K. Singh, Director, Indian Agricultural Research Institute of ICAR, in his most recent J. Raghotham Reddy memorial lecture at Hyderabad, highlighted that despite 32.7 percent increase in the area during 1951-2021, the production increased by almost six times, and productivity increased by 4.5 times during the same period, maintaining the food security. The period did not saw pestilence and famines in the country. Market-assisted Selection (MAS) is now an integral part of the cultivar development programmes at the ICAR institutions and several agricultural universities, developing 74 crop cultivars in seven different crops -rice, wheat, pearl millet, chickpea, soybean, groundnut, and maize. This still leaves the challenge of India producing 333mt of food grains to feed its projected 1.64bn population by 2050.

As per the NSSO (2014), about 232 million persons are employed still in agriculture (49 per cent of the workforce), contributing about 17 per cent of the GDP. The number seems to have come down to about 219 million in 2015, which is still a very significant number (Kapoor, 2017). A NITI Aayog study estimated the agricultural labour productivity is one-third of the non-agricultural sectors. There is severe shortage of farm labour either to cut the sugarcane crop or cotton picking – the two largest labour-absorbing crops.

Telangana State is the first state to commence growing single-pick cotton from this year, thanks to the intense research by the PJTSAU under the specific directive of the farmer-Chief Minister, K. Chandrasekhar Rao. Farmers are eagerly looking for assured yields of this variety to save the labour costs.

Farming has been the focus and not the farmer of all the research that no doubt yielded excellent results. Doubling of farmers’ income by 2025 is still a dream, because reforms in agriculture sector were just ignored for the last three decades. Small farmer and tenant farmers realised that they have to turn as entrepreneurs for sustainable growth. Several start-ups in farm field have lately come up. Still, aggregators at the farm gate, marketing reforms and easy access to credit beg attention of the policy maker, more so, when we look at the technological innovations that A. K. Singh spoke off:  1. Molecular breeding, 2. Crop biofortification, 3. Microbial technologies, 4. Climate change and mitigation strategies, 5. Satellite remote-sensing technology, 6. Precision agriculture, and 7. Improving irrigation efficiency.

In addition to speed breeding, genome breeding, and use of remote sensing techniques, drone technology for smart agriculture is making deep inroads. A. Drone Sensing for mapping and discrimination of crops, monitoring crop stress – biotic and abiotic, yield damage assessment, soil fertility, and for agri-input applications are some of the drone-based technologies.

While it is true that a century beyond will see the disruptive technologies shaping agriculture growth, the way forward would be in investing in human resources and infrastructure for disruptive innovations (at least 1.4 percent of GDP in agriculture), like Internet of technologies (IoT), AI, ML, Block Chain leading climate, smart, regenerative and remunerative agriculture, adoption of management practices integrating small farm holdings, and mainstreaming the biofortified crops and nutrition literacy.

Investment should come either from the farmer’s equity or his ability to raise the debt. Debt markets in India are deeply suspicious of the farmer and small entrepreneur. Therefore, there is need for a cultural shift in lending to the farm sector. Second, all the above technologies still carry the risk of adverse weather and climate. They are also subject to the cyclones, tsunamis, floods, and holocausts. While crop related technologies are of short term nature, rest are all medium to long term capital investments. Agri-entrepreneurs should look to investments from angel funds, patient capital investors and social capital entrepreneurs. Green House Gas reduction from the climate-resilient agricultural practices have the potential to earn carbon credits (CC) up to 5CC/ha and 1 carbon credit is equal to US$37. 15000 hectares have this potential, according to A. K. Singh.

Further, integrated farming on small farm holdings – crop, horticulture, household dairy, backyard poultry, small pond-culture, and home-grown ducks – will cross-hold risks and pave the way for farmer doubling his income erelong. Sustainability of agricultural growth is assured thus through heavy capital investments in climate resistant technologies, cashing in carbon credits sooner than later, change in the mind-set of lenders and farmers to accelerate lending, and appropriate insurance mechanisms that are farmer-friendly.

*This article is based largely on a couple of lectures: 1. V. Praveen Rao, at the Fifth International Agronomy Congress and A.K. Singh, at the Farm and Rural Science Foundation’s J. Raghotham Reddy Memorial Lecture. The views expressed are mine.

Future is bright for Indian Agriculture – But Reforms Imminent.

B. Yerram Raju*

Agriculture is one sector that takes all the four factors of production – land, labour, capital, and organisation/management - in full measure, and consumes the scarcest resource water additionally. Several limitations surround the future of agriculture. Land is limited and there are several claims from dwellers to industrialists. So is water and capital. Management depends on the absorption of the latest technologies.

India has only 4 percent of world’s wate resources. Its present population of around 1.39bn is likely to escalate to 1.69bn according to population experts. Improving (a) water resources’ optimization, (b) productivity of the small holdings that constitute 50 percent of the arable land, (c) technologies unique to the production systems of India, (d) integrating all types of agricultural activities and (e) resilience to climate change, is imperative.

India’s agricultural growth (1950-2020) can be seen in many areas: the second largest horticultural production in the world; the highest milk production in the world, witnessing twelve-fold growth; the second largest fish production in the world. It is now a net exporter and its agricultural production is 44 percent higher than that of the US. According to Praveen Rao, Vice Chancellor, PJTS Agricultural University, Hyderabad, India’s agricultural GDP rose from US$ 15bn in 1960 to US$101bn in 2000. During the next sixteen years, the growth was 350 percent more than that registered during the preceding thirty years.    

A.K. Singh, Director, Indian Agricultural Research Institute of ICAR, in his most recent J. Raghotham Reddy memorial lecture at Hyderabad, highlighted that despite 32.7 percent increase in the area during 1951-2021, the production increased by almost six times, and productivity increased by 4.5 times during the same period, maintaining the food security. The period did not saw pestilence and famines in the country. Market-assisted Selection (MAS) is now an integral part of the cultivar development programmes at the ICAR institutions and several agricultural universities, developing 74 crop cultivars in seven different crops -rice, wheat, pearl millet, chickpea, soybean, groundnut, and maize. This still leaves the challenge of India producing 333mt of food grains to feed its projected 1.64bn population by 2050.

As per the NSSO (2014), about 232 million persons are employed still in agriculture (49 per cent of the workforce), contributing about 17 per cent of the GDP. The number seems to have come down to about 219 million in 2015, which is still a very significant number (Kapoor, 2017). A NITI Aayog study estimated the agricultural labour productivity is one-third of the non-agricultural sectors. There is severe shortage of farm labour either to cut the sugarcane crop or cotton picking – the two largest labour-absorbing crops.

Telangana State is the first state to commence growing single-pick cotton from this year, thanks to the intense research by the PJTSAU under the specific directive of the farmer-Chief Minister, K. Chandrasekhar Rao. Farmers are eagerly looking for assured yields of this variety to save the labour costs.

Farming has been the focus and not the farmer of all the research that no doubt yielded excellent results. Doubling of farmers’ income by 2025 is still a dream, because reforms in agriculture sector were just ignored for the last three decades. Small farmer and tenant farmers realised that they have to turn as entrepreneurs for sustainable growth. Several start-ups in farm field have lately come up. Still, aggregators at the farm gate, marketing reforms and easy access to credit beg attention of the policy maker, more so, when we look at the technological innovations that A. K. Singh spoke off:  1. Molecular breeding, 2. Crop biofortification, 3. Microbial technologies, 4. Climate change and mitigation strategies, 5. Satellite remote-sensing technology, 6. Precision agriculture, and 7. Improving irrigation efficiency.

In addition to speed breeding, genome breeding, and use of remote sensing techniques, drone technology for smart agriculture is making deep inroads. A. Drone Sensing for mapping and discrimination of crops, monitoring crop stress – biotic and abiotic, yield damage assessment, soil fertility, and for agri-input applications are some of the drone-based technologies.

While it is true that a century beyond will see the disruptive technologies shaping agriculture growth, the way forward would be in investing in human resources and infrastructure for disruptive innovations (at least 1.4 percent of GDP in agriculture), like Internet of technologies (IoT), AI, ML, Block Chain leading climate, smart, regenerative and remunerative agriculture, adoption of management practices integrating small farm holdings, and mainstreaming the biofortified crops and nutrition literacy.

Investment should come either from the farmer’s equity or his ability to raise the debt. Debt markets in India are deeply suspicious of the farmer and small entrepreneur. Therefore, there is need for a cultural shift in lending to the farm sector. Second, all the above technologies still carry the risk of adverse weather and climate. They are also subject to the cyclones, tsunamis, floods, and holocausts. While crop related technologies are of short term nature, rest are all medium to long term capital investments. Agri-entrepreneurs should look to investments from angel funds, patient capital investors and social capital entrepreneurs. Green House Gas reduction from the climate-resilient agricultural practices have the potential to earn carbon credits (CC) up to 5CC/ha and 1 carbon credit is equal to US$37. 15000 hectares have this potential, according to A. K. Singh.

Further, integrated farming on small farm holdings – crop, horticulture, household dairy, backyard poultry, small pond-culture, and home-grown ducks – will cross-hold risks and pave the way for farmer doubling his income erelong. Sustainability of agricultural growth is assured thus through heavy capital investments in climate resistant technologies, cashing in carbon credits sooner than later, change in the mind-set of lenders and farmers to accelerate lending, and appropriate insurance mechanisms that are farmer-friendly.

*This article is based largely on a couple of lectures: 1. V. Praveen Rao, at the Fifth International Agronomy Congress and A.K. Singh, at the Farm and Rural Science Foundation’s J. Raghotham Reddy Memorial Lecture. The views expressed are mine.

 

 Future is bright for Indian Agriculture – But Reforms Imminent.

B. Yerram Raju*

Agriculture is one sector that takes all the four factors of production – land, labour, capital, and organisation/management - in full measure, and consumes the scarcest resource water additionally. Several limitations surround the future of agriculture. Land is limited and there are several claims from dwellers to industrialists. So is water and capital. Management depends on the absorption of the latest technologies.

India has only 4 percent of world’s wate resources. Its present population of around 1.39bn is likely to escalate to 1.69bn according to population experts. Improving (a) water resources’ optimization, (b) productivity of the small holdings that constitute 50 percent of the arable land, (c) technologies unique to the production systems of India, (d) integrating all types of agricultural activities and (e) resilience to climate change, is imperative.

India’s agricultural growth (1950-2020) can be seen in many areas: the second largest horticultural production in the world; the highest milk production in the world, witnessing twelve-fold growth; the second largest fish production in the world. It is now a net exporter and its agricultural production is 44 percent higher than that of the US. According to Praveen Rao, Vice Chancellor, PJTS Agricultural University, Hyderabad, India’s agricultural GDP rose from US$ 15bn in 1960 to US$101bn in 2000. During the next sixteen years, the growth was 350 percent more than that registered during the preceding thirty years.    

A.K. Singh, Director, Indian Agricultural Research Institute of ICAR, in his most recent J. Raghotham Reddy memorial lecture at Hyderabad, highlighted that despite 32.7 percent increase in the area during 1951-2021, the production increased by almost six times, and productivity increased by 4.5 times during the same period, maintaining the food security. The period did not saw pestilence and famines in the country. Market-assisted Selection (MAS) is now an integral part of the cultivar development programmes at the ICAR institutions and several agricultural universities, developing 74 crop cultivars in seven different crops -rice, wheat, pearl millet, chickpea, soybean, groundnut, and maize. This still leaves the challenge of India producing 333mt of food grains to feed its projected 1.64bn population by 2050.

As per the NSSO (2014), about 232 million persons are employed still in agriculture (49 per cent of the workforce), contributing about 17 per cent of the GDP. The number seems to have come down to about 219 million in 2015, which is still a very significant number (Kapoor, 2017). A NITI Aayog study estimated the agricultural labour productivity is one-third of the non-agricultural sectors. There is severe shortage of farm labour either to cut the sugarcane crop or cotton picking – the two largest labour-absorbing crops.

Telangana State is the first state to commence growing single-pick cotton from this year, thanks to the intense research by the PJTSAU under the specific directive of the farmer-Chief Minister, K. Chandrasekhar Rao. Farmers are eagerly looking for assured yields of this variety to save the labour costs.

Farming has been the focus and not the farmer of all the research that no doubt yielded excellent results. Doubling of farmers’ income by 2025 is still a dream, because reforms in agriculture sector were just ignored for the last three decades. Small farmer and tenant farmers realised that they have to turn as entrepreneurs for sustainable growth. Several start-ups in farm field have lately come up. Still, aggregators at the farm gate, marketing reforms and easy access to credit beg attention of the policy maker, more so, when we look at the technological innovations that A. K. Singh spoke off:  1. Molecular breeding, 2. Crop biofortification, 3. Microbial technologies, 4. Climate change and mitigation strategies, 5. Satellite remote-sensing technology, 6. Precision agriculture, and 7. Improving irrigation efficiency.

In addition to speed breeding, genome breeding, and use of remote sensing techniques, drone technology for smart agriculture is making deep inroads. A. Drone Sensing for mapping and discrimination of crops, monitoring crop stress – biotic and abiotic, yield damage assessment, soil fertility, and for agri-input applications are some of the drone-based technologies.

While it is true that a century beyond will see the disruptive technologies shaping agriculture growth, the way forward would be in investing in human resources and infrastructure for disruptive innovations (at least 1.4 percent of GDP in agriculture), like Internet of technologies (IoT), AI, ML, Block Chain leading climate, smart, regenerative and remunerative agriculture, adoption of management practices integrating small farm holdings, and mainstreaming the biofortified crops and nutrition literacy.

Investment should come either from the farmer’s equity or his ability to raise the debt. Debt markets in India are deeply suspicious of the farmer and small entrepreneur. Therefore, there is need for a cultural shift in lending to the farm sector. Second, all the above technologies still carry the risk of adverse weather and climate. They are also subject to the cyclones, tsunamis, floods, and holocausts. While crop related technologies are of short term nature, rest are all medium to long term capital investments. Agri-entrepreneurs should look to investments from angel funds, patient capital investors and social capital entrepreneurs. Green House Gas reduction from the climate-resilient agricultural practices have the potential to earn carbon credits (CC) up to 5CC/ha and 1 carbon credit is equal to US$37. 15000 hectares have this potential, according to A. K. Singh.

Further, integrated farming on small farm holdings – crop, horticulture, household dairy, backyard poultry, small pond-culture, and home-grown ducks – will cross-hold risks and pave the way for farmer doubling his income erelong. Sustainability of agricultural growth is assured thus through heavy capital investments in climate resistant technologies, cashing in carbon credits sooner than later, change in the mind-set of lenders and farmers to accelerate lending, and appropriate insurance mechanisms that are farmer-friendly.

*This article is based largely on a couple of lectures: 1. V. Praveen Rao, at the Fifth International Agronomy Congress and A.K. Singh, at the Farm and Rural Science Foundation’s J. Raghotham Reddy Memorial Lecture. The views expressed are mine.

https://timesofindia.indiatimes.com/blogs/fincorp/future-is-bright-for-indian-agriculture-but-reforms-imminent/