MODEL ANSWER: CIVIL SERVICE MAIN EXAM,2014, G.S-3 ?( ECONOMIC DEVELOPMENT) BY VASHISTHA RAY

 Q.4. “ In the villages itself no form of credit organization will be suitable except the cooperative society.”----  All India Rural Credit serve rural clients?

 Discuss this statement in the background of agricultural finances in India. What constraints and challenges do financial institutions supplying agricultural finance face? How can technology be used to better reach and serve rural clients?

Ans: Almost all the committees or working groups constituted to report on rural credit system in India since Royal Commission On Agriculture (1928) have opined that from the point of view of structural appropriateness, there is no alternative to cooperatives for provision of rural credit. The given observation made by All India Rural Credit Survey also reaffirms this opinion. The survey highlights the importance of cooperatives and shortcomings of other financial institutions supplying agricultural finances in India. These institutions are making strident efforts to cope with the credit requirements of the farmers. However, there are certain serious constraints and challenges faced by these institutions. They are as follow:

A.     Inadequate Availability

Availability of credit is inadequate compared with its requirement. Undoubtedly, the value of flow of credit has substantially increased over time. Yet, it continues to be less in relation to demand. There has been an exponential growth in demand for agricultural credit over time. It is partly because the farmers are shifting from non-institutional to institutional sources of credit. It is also because of expansion of commercial agriculture and a substantial rise in prices of modern agricultural inputs.

B.      Dismal Recovery

The recovery of credit has been far from satisfactory. This impedes the process of further lending. Nearly 40-42 per cent of the loans have remained unrecovered during the last 4 years.

C.      Marginalization Of Small Holders

In the matter of availability of credit small holders are often marginalized. This is owing to their low capacity to offer collateral for the loans. Accordingly, even when availability of credit has multiplied over time, those in dire need are often left high and dry.

D.     Unproductive Use

While on the one hand funds are scarce, on the other, unproductive use of credit continues to be a serious menace. The farmers in India are accustomed to make huge expenditure on family functions. This significantly reduces the very purpose of various agencies engaged in agricultural finances.

E.      Red –Tapism

Red- tapism has become a standard practice in official matters. Formalities are so cumbersome in obtaining institutional loans that the farmers are often compelled to divert upon to the non-institutional sources.

F.       Ignorance Of Farmers

Ignorance of farmers and lack of awareness among them has always worked as a serous impediments to serve rural farmers.

Technology can be used to educate and identify poor farmers. Delivery of funds to them can also be made speedy and efficient using technologies such as mobile banking. Farmers should be issued pass books linked to their aadhar- card showing details of their land and fixed assets . This will streamline the procedure for the grants of loans, avoiding much of red-tapism.

                                                    Vashistha Ray.

MODEL ANSWER: CIVIL SERVICE MAIN EXAM, 2014, G.S-3( ECONOMIC DEVELOPMENT) BY VASHISTHA RAY

Q.3. There is also a point of view that Agriculture Produce Marketing Committees (APMCs) set up under the state acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.

Ans:  The given point of view clearly highlights the failure of APMCs in supervising and monitoring the activities of regulated market and thus in protecting the interests of farmers. 

APMCs have been set up by various states to monitor the activities of regulated market. The committee has representatives of state government, farmers, traders, commission agents and local body. The chairman of the committee is always a farmer. The main objective of this committee is to protect the farmers from the misery of distress sale to middlemen.

                 The committee has been entrusted with the task of providing storage facilities to farmers in regulated market. The committee also ensures that no broker or middlemen operates in regulated market. Only registered traders are allowed to purchase agriculture produce from farmers and that too at pre-announced prices. Weights & measures of traders operating in regulated market are always inspected and farmers are provided training by APMC to conduct business in regulated market.

                 Regulated market structure set up in India by respective state governments since 1951 under their respective APMCs acts has over the years brought discipline in the marketing of agriculture produce and taking care of various problems relating to malfunctioning of agricultural market.

          But over the years, it has been found that APMCs have failed to discharge their responsibilities. Farmers are not adequately informed about prevailing prices, weight & measures are not regularly inspected and training program conducted to increase the efficiency of market is irregular and unsatisfactory. There have been reports of collusion among various members of committee leading to rampant corruption in regulated market. All these along with the inefficiency of APMCs, farmers are denied fair and remunerative prices at the cost of agricultural development.

 The APMC act is also responsible for food inflation as it has created monopolies and distributional inefficiencies by not permitting private players and unregistered traders to set up the wholesale market in areas designated as regulated market by states. The committee also charges heavy mandi  fee from traders as well as farmers of regulated market. This  also becomes the cause of inflation. Since the time fruits and vegetables have been brought under the ambit of regulated market, food inflation has increased further.

 However, under model APMC acts,2003, private players have been allowed to purchase agricultural produce and develop agricultural infrastructure such as cold storage. Farmers are also sponsoring their own market in various states. These developments have brought in competition in agricultural market and thereby increasing the efficiency of APMCs. Vashistha Ray.