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P. Devarajan

IN schools and colleges, the Hindi, Sanskrit or other Indian language teachers have always been lesser mortals compared to the English tutors. This is similar to the contempt which an English language reporter has for those in the Indian language dailies. The same holds in many ways for officials manning the rural credit portfolio in the RBI or nationalised banks, as foreign and new private banks do not believe anything worthy exists outside the metros.

TV spots and TV fame are assured for men and women manning forex, debt management, corporate loans, and mergers. The practice extends to the Annual Reports brought out by RBI. In the last few years, never has a full chapter been devoted to the travails of the farm sector in terms of getting loans at the price corporates in cities get. The issue has never been put down in detail, a job that the RBI is well placed to do.

Yet, going by the Annual Report 2001-02, agriculture makes a lot of sense and the farmer still is a human being even in 2002. Says the Annual Report: "Coincident peaks - Q2 of 2000-01 and Q4 of 2001-02 - and troughs - Q3 and Q4 of 2000-01- in real GDP and GDP from agriculture for 2000-01 and 2001-02 suggest that fluctuations in agricultural activity mainly influenced and set the pattern for the overall GDP growth path.''

An inset in the Annual Report styled `Agriculture, Employment and Poverty', admits to poverty levels going down with a growth in primary (farming) and tertiary (services) sectors. Secondary sector impacts little. According to the 55th Round of the NSSO's sample survey (July 1999 to June 2000), the poverty ratio (on a 30-day recall basis), fell to 26.1 per cent in 1999-2000 from 36 per cent in 1993-94. It declined from 37.3 per cent to 27.1 per cent in rural areas and from 32.4 per cent to 23.6 per cent in urban areas.

"A significant feature is that the number of poor which remained fairly constant at about 320 million for two decades has come down to 260 million in 1999-2000.... Accordingly, an effective strategy for alleviation of poverty has to be based on rapid and sustained growth of the agricultural and allied sector and rural industrialisation centred around agro-industries.'' Is there any such strategy in the RBI Annual Report?

The RBI has stipulated 18 per cent of total net bank credit be lent to agriculture. Total amount of outstanding agricultural advances has (in absolute terms) gone up from Rs 34,304 crore in 1998 to Rs 63,083 crore in 2002 for nationalised banks; the percentage stood at 15.7 per cent in 1998 moving up 16.3 per cent in 1999 and staying put at 15.8 per cent in 2002. The case of private sector banks is worse. This when the recovery of advances made by the public sector banks remained stable at around 70 per cent in the last two years. Corporate loan recovery does not seem to go beyond 40 per cent.

Again, short-term loans to the farm sector and allied activities have been higher in the 1990s than in 1980s. The Annual Report admits: "The trend growth rate of medium/long-term loans, which are important for capital formation in agriculture, has shown only a marginal improvement. The shift in composition of the agricultural loans towards short term loans reflects a growing `risk aversion' among banks in respect of medium/long-term loans which entail higher credit and market risks.''

In effect, farm funding is risky for the banking industry and farmers will have to depend on money-lenders as confirmed by the Gupta committee.

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