Sunday, December 11, 2016
Agriculture sector will be transformed with better credit facility for farmers.
Demonetisation: Agriculture sector will be transformed with better credit facility for farmers. Cash is the primary mode of transaction in agriculture sector, demonetisation is bound to cause temporary stress in the system. This historic move has the potential of bringing about transformational changes in the sector like better access to credit for farmers, elimination of middlemen, direct transfer of subsidies to farmers and ultimately linking the Indian farmer to the global agricultural market. However, in the short term, the sector has to brave several storms before it realizes the true fruits of demonetization. In the transitional phase, farm produces with limited shelf-life like fruits and vegetables, which significantly contribute to overall farm output, will be hit due to cash crunch. Similarly, payment of wages to farm laborers and rentals for farm implements will too become difficult considering the limited access of service providers to the banking system. The steep decline in transactions at various states APMC’s (up to 70 percent as per reports) in the aftermath of the decision is a testimony to this fact. Demonetization can potentially address the perennial problem of credit in farm sector. With banking system glowing with liquidity, there can be increase in investments in farm sector, which is the only way to get out of the vicious circle of subsistence farming. Despite being declared as a ‘priority sector’ credit availability to typical farmers for investment in their own lands are far from adequate. This has forced farmers to rely on non-institutional credit, which further aggravates the problem. continue