Sur­pris­ing Rev­e­la­tions :

A NABARD sur­vey on ru­ral fi­nan­cial in­clu­sion shows that a higher num­ber of house­holds has ac­cess to in­sti­tu­tional fi­nance. But in­sur­ance still re­mains a stum­bling block.

India Business Journal - - CONTENTS -

A NABARD sur­vey on ru­ral fi­nan­cial in­clu­sion shows that a higher num­ber of house­holds has ac­cess to in­sti­tu­tional fi­nance. But in­sur­ance still re­mains a stum­bling block.

The All In­dia Ru­ral Fi­nan­cial In­clu­sion Sur­vey 2016-17, con­ducted for the first time in the coun­try by the Na­tional Bank for Agri­cul­ture & Ru­ral De­vel­op­ment (NABARD) seems to have some flaws in its find­ings. One of the rea­sons could be that the sur­vey was con­ducted, as pointed out by one of its mem­bers, Ashok Gu­lati, in a drought, year re­sult­ing in some dis­tor­tion as it may not have cap­tured the true pic­ture dur­ing nor­mal times in ru­ral econ­omy.

This is ev­i­dent from the fact that one of its ma­jor find­ings is that agri­cul­ture gen­er­ates not even a quar­ter of ru­ral house­hold in­comes in In­dia. True that farm in­come may not be ad­e­quate, but the fact is that it is the ma­jor source of in­come of farm­ers, though the num­ber of per­sons hav­ing it as liveli­hood is grad­u­ally re­duc­ing due to frag­men­ta­tion of land­hold­ings and mi­gra­tion.

Sur­vey find­ings

Ac­cord­ing to the sur­vey re­leased in Au­gust this year, for the so-called agri­cul­tural house­holds, just over 43 per cent of their aver­age in­come comes from cul­ti­va­tion of crops and rear­ing of an­i­mals. What else could one ex­pect from such a sur­vey in a drought year?

The NABARD sur­vey es­ti­mates the to­tal num­ber of ru­ral house­holds in In­dia for 2016-17 at 21.17 crore. The def­i­ni­tion of "ru­ral" is a broad one, cov­er­ing rev­enue vil­lages and semi­ur­ban cen­tres with a pop­u­la­tion of less than 50,000. Out of the 21.17 crore ru­ral house­holds, 10.07 crore, or un­der 48 per cent, are "agri­cul­tural" those with at least one mem­ber self­em­ployed in farm­ing and re­port­ing an­nual value of pro­duce at more than Rs 5,000. The re­main­ing 11.10 crore house­holds or 52 per cent are "nona­gri­cul­tural".

If there is less Kr­ishi (agri­cul­ture) in Bharat as claimed by it, how is it that In­dia's food­grain and hor­ti­cul­ture pro­duc­tion is in­creas­ing year after year? Last year, In­dia achieved a record 275 mil­lion tonnes (mt) of food­grain pro­duc­tion and 375 mt of hor­ti­cul­ture pro­duc­tion, in­clud­ing fruits and veg­eta­bles. This year, food­grain pro­duc­tion is ex­pected to be bet­ter at 285 mt.

Ac­cord­ing to the sur­vey, whose ref­er­ence pe­riod is 2015-16, the aver­age net monthly in­come of In­dian ru­ral house­holds - after de­duct­ing ex­penses in­curred in the course of eco­nomic ac­tiv­ity - was Rs 8,059. The high­est share of this (Rs 3,504) was ac­counted for by wage labour (both farm and non-farm), which was fol­lowed by govern­ment or pri­vate ser­vice jobs (Rs 1,906). On the other hand, agri­cul­ture - that is in­come from crop cul­ti­va­tion and live­stock rear­ing - con­trib­uted only Rs 1,832. But what's in­ter­est­ing is that even within "agri­cul­tural house­holds", the share of aver­age in­come from cul­ti­va­tion and live­stock rear­ing was just over 43 per cent.

The bal­ance of 57 per cent of in­come in their case, too, was from nona­gri­cul­tural sources. Though this does not re­flect the cor­rect pic­ture as it be­ing a drought year, one thing is clearer that farm­ers are try­ing to aug­ment their farm in­come from other sources.

The na­tional ru­ral em­ploy­ment gen­er­a­tion pro­gramme or the MNGREGA could be a con­trib­u­tory fac­tor con­sid­er­ing that it was a drought year. As it is, agri­cul­ture is sea­sonal in na­ture, and hence, there is in­her­ent dis­guised un­em­ploy­ment or un­der­em­ploy­ment as it is called in eco­nomic par­lance. In such a sce­nario, it is a wel­come de­vel­op­ment, as par­tic­u­larly small farm­ers do have other sources of liveli­hood to aug­ment their farm in­come as re­turns are low be­sides high risks due to va­garies of weather.

Chal­lenges ahead

The NABARD sur­vey not only re­con­firms but mag­ni­fies the find­ings of the Na­tional Sam­ple Sur­vey Of­fice's (NSSO) Sit­u­a­tion As­sess­ment Sur­vey of Agri­cul­tural House­holds con­ducted for 2012-13. That sur­vey had es­ti­mated agri­cul­tural house­holds to con­sti­tute 57.8 per cent of all ru­ral house­holds. One rea­son for the higher share could be that the NSSO's def­i­ni­tion of "ru­ral" did not ex­tend to semi­ur­ban cen­tres with pop­u­la­tion be­low 50,000, which made up 16 per cent of house­holds in the NABARD sur­vey.

In the NSSO sur­vey, 67.2 per cent of the aver­age in­come of agri­cul­tural house­holds came from cul­ti­va­tion and live­stock rear­ing. That share is even lower, at 43.1 per cent, in the re­cent NABARD sur­vey. The method­olog­i­cal dif­fer­ences not­with­stand­ing, both the sur­veys high­light the same fact of ru­ral In­dia be­com­ing less agri­cul­tural, both in terms of the share of fam­i­lies en­gaged in farm­ing and a di­ver­si­fi­ca­tion of in­come sources even in their case. There is how­ever noth­ing much to quar­rel with this find­ing as it only states the ob­vi­ous. With land­hold­ing be­com­ing smaller and eco­nomic ac­tiv­i­ties pro­gres­sively in­creas­ing in the coun­try, the trick­le­down ef­fect comes into play and eco­nomic de­vel­op­ment be­comes more in­clu­sive, which needs to be ap­pre­ci­ated.

The NSSO sur­vey reck­oned the aver­age monthly net in­come of agri­cul­tural house­holds in In­dia for 2012-13 at Rs 6,426. That fig­ure in the NABARD sur­vey for 2015-16 is Rs 8,931, an in­crease of 39 per cent over three years. A dou­bling of in­comes would re­quire this to go up to Rs 17,862 by 2021-22, the tar­get date set by the Naren­dra Modi-led Na­tional Demo­cratic Al­liance govern­ment.

It is sig­nif­i­cant to note that the dou­bling is with ref­er­ence to agri­cul­tural house­hold in­comes, which could be from both farm and non-farm sources. This how­ever is go­ing to be a tough task con­sid­er­ing the hic­cups in the do­mes­tic as well as global economies.

The vig­or­ous im­ple­men­ta­tion of the govern­ment's flag­ship pro­gramme, the Prad­han Mantri Jan Dhan Yo­jana, to en­sure that ev­ery house­hold has a bank ac­count has en­cour­aged ru­ral house­holds to have ac­cess to bank­ing and have sav­ings. But in­vest­ment lev­els and pen­sion and in­sur­ance cov­er­age still re­main very low. Low in­sur­ance cover is one of the rea­sons for farm dis­tress as it has led to high in­debt­ed­ness, par­tic­u­larly in times of crop fail­ure, which is quite fre­quent in In­dia due to droughts and floods.

The sur­vey also showed for ob­vi­ous rea­sons that lev­els of in­debt­ed­ness were high. A ma­jor­ity of the agri­cul­tural house­holds was in­debted with the amount of loans nearly equalling an­nual in­comes. More than one in two agri­cul­tural house­holds sur­veyed were in­debted. The aver­age out­stand­ing debt for these house­and holds was Rs 1.04 lakh but most bor­rowed from fi­nan­cial in­sti­tu­tions rather than money­len­ders.

One in two ru­ral house­holds saved in 2016-17. Nearly one in two ru­ral house­holds that saved did so in fi­nan­cial in­sti­tu­tions with more agri­cul­tural house­holds sav­ing in such in­sti­tu­tions com­pared to the non-agri­cul­tural house­holds.

The sur­vey cov­ered 245 dis­tricts across 29 States and was done across tier-III to tier-VI cities. It cov­ered 40,327 house­holds and 1,87,000 peo­ple cov­ered all as­pects of fi­nan­cial in­clu­sion, in­clud­ing loans, sav­ings, in­vest­ments, pen­sion, in­sur­ance and re­mit­tance.

There are how­ever ques­tions about whether the sam­ple is re­ally a true rep­re­sen­ta­tive of the en­tire farm house­holds in the coun­try, which is pretty large and var­ied. NABARD Chair­man Harsh Ku­mar Bhan­wala has said that the sur­vey shows that there is scope for banks to pro­vide loans to more peo­ple rather than lend to the same set of peo­ple. Mean­while, in­sur­ance cov­er­age re­mains poor. Only around one in four house­holds has ac­cess to in­sur­ance cov­er­age. Old age in­come se­cu­rity in the form of pen­sion is worse. Only one in five house­holds has ac­cess to any type of pen­sion. This is one area where the govern­ment will have to work hard as a lot still needs to be cov­ered to achieve fi­nan­cial in­clu­sion fully, par­tic­u­larly in ru­ral In­dia.

K R SUDHAMAN

For agri­cul­tural house­holds, a lit­tle over 43% of their aver­age in­come comes from cul­ti­va­tion of crops.

More than one in two agri­cul­tural house­holds sur­veyed were in­debted.

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