Time to push credit for smart farming in India

 India’s agricultural growth has been a cause of concern for some time now. Though the sector is poised to grow at 4.4 per cent in GVA for 2016-17, an impressive jump from the previous year’s growth rate of 0.8 per cent, the swing only indicates the high dependency on the monsoons and the continued reliance on traditional farming methods. The contribution of agriculture in India’s economic output is about 14 per cent now, down by almost half since the 1980s though more than 50 per cent of the country’s population is involved in farm-related activities.

This state of affairs is unlikely to meet the needs of a nation on the move. On the one hand, we see stagnation and decline in agriculture coupled with emerging challenges posed by climate change and water shortages. On the other hand, there are dramatic socio-economic changes as literacy and life expectancy rise, more people are digitally connected and a data revolution takes root. These are opportunities to meet the emerging challenges of the agri sector and offer an opportunity to leap ahead. Such a leap can come only if the nation is driven in its mission to adopt ‘smart farming’. Just as the national conversation has moved swiftly towards digital payments and ‘smart’ cities, we need to move with even greater speed to make smart farming a national priority.

Rethinking the approach

Smart farming is the transformation and reorientation of farming to increase yields through enhanced productivity, improved resilience and reduced side effects. Only this can help India keep pace with the rising demand for agricultural commodities from a population marked by growing numbers, rising incomes and attendant changes in lifestyle and consumption patterns. Such changes and developments have generated a demand for high-value commodities such as milk and milk products, egg and poultry products, fruits and vegetables, and fish products. This has strained limited natural resources such as arable land, groundwater and fossil fuel, and re-enforced the need for smart farming.

Smart farming centres around seven ‘E’s: (i) economic viability of the farming; (ii) efficient use of limited natural resources such as higher production per unit of water, land, and labour resources; (iii) enhancement in production through higher productivity; (iv) energy saving of limited fossil fuel; (v) equitable distribution of benefits across the farming community and inter and intra-regional distribution; (vi) environment/ecology protection; and finally, (vii) employment generation to ensure high income levels.

IT support

Because smart farming will necessarily be technology-centric, we can look to reap the benefits of huge IT capabilities within the country and open up a new era of growth. There is work to be done in terms of sensing technologies for weather forecasting, land-use pattern-mapping, cropping-mapping, soil-testing and soil-enriching techniques, mineral-mapping of animals, and so on. All this can be achieved through the higher use of software solutions involving data analytics leading to farm management information systems and a better network of communication systems. In this context, the importance of an intensive hardware network cannot be denied.

In short, smart farming is precision farming based on the use of the latest technology along with the mitigation of side effects of various development programmes including the green, white, blue and golden revolutions that have caused irreparable loss to ecology and environment. The side effects in many ways are silently creeping on us: the toll of increasing pollution, greenhouse gases, water-logging, high consumption of water resources, indiscriminate use of fertilisers and pesticides, etc, will be disastrous in the years to come.

A successful switch to smart farming will largely depend on the availability of credit. The formal rural credit system registered a marked increase in market share in terms of quantum of credit from 7.3 per cent in 1951 to 56.0 per cent in 2012, according to the last available numbers published by the NSSO. However, in terms of the number of indebted farmers, informal credit systems dominated by money lenders, etc, ruled the scene.

The agency-wise break-up reveals that in 2012, in the case of the formal credit market, commercial banks ranked first with a 25.1 per cent market share, closely followed by co-operatives at 24.9 per cent. Microfinance institutions accounted for only 2.2 per cent of market share. The meagre share would have only declined further since microfinance institutions have faced challenges and increased government scrutiny over the last several years.

This suggests that microfinance institutions have not been able to make their presence felt in rural areas. Commercial banks and cooperatives still rule the roost. Interestingly enough, while informal credit agencies have been neutral to the size of assets of the borrowers, formal credit agencies have a preference for higher asset households. Under the present dispensation, unless banks, both commercial and cooperative, are sensitised towards their social responsibility, flow of credit to the weaker sections of society will remain limited.

Impactful innovations

A number of innovations such as the kisan credit card scheme, RIDF, financial inclusion plans including the PM Jan Dhan Yojana, the business correspondent scheme, and the stipulation of targets for financing of short-term production credit under subvention of interest scheme have a favourable impact on the flow of credit to the farm sector. Yet non-inclusion of investment credit under the interest subvention scheme will have an adverse impact on the flow of investment credit. Needless to say, investment credit is crucial for capital formation in the farm sector and it should also be subsidised. This means subsidising purchases such as computers, computer software, sensor systems, satellite trackers, and IoT devices used in the agri sector.

We already have a huge network of banking outlets aggregating 5.54 lakh, including 48,536 branches along with 4.41 crore Basic Savings Bank Deposit Accounts (BSBDAs) including Jan Dhan accounts as at the end of September 2015. The number of these accounts has jumped to over 20 crore as of January 2016, with deposits exceeding Rs. 30,000 crore, according to reports. This, along with a resource-base generation from the demonetisation of Rs. 500 and Rs. 1000 notes, can plausibly help finance smart farming in a big way. However, to encourage banks it is imperative that advances to technology providers for smart farming be treated as a part of indirect finance to agriculture under priority sector advance. Similarly, financing of farmers and technology service providers should be under interest subvention schemes irrespective of the tenure of credit.

The way to push this forward and get investments going on a large scale is to catch the imagination of the nation. For this, the Government must not only do more but also talk more about smart farming, certainly with as much enthusiasm as it has pushed its other digital initiatives for a technologically advanced and connected India.