Managing Risks of Drought in Indian Agriculture: Role of Credit Institutions

K.C. Badatya

Agricultural Economics Research Review, 2005, vol. 18, issue Conference

Abstract: The pattern of growth in agriculture and rainfall has been studied along with droughts in the past and the role of the credit institutions in managing droughts. There has been no significant breakthrough in research on dryland farming. Two major negative features of agricultural growth presently affecting agriculture are: (i) instability in year-to-year production, and (ii) inter-regional and inter-crop disparities in production performance. It has been pointed that the decline in foodgrains production during the drought years (13.2% in 2002-03 over 2001-02) has incapacitated our contingency production programmes. The reduction in farm income as a result of drought forces the small and marginal farmers to borrow from other sources to meet their consumption requirements. The debt repayment capacity of the borrowers gets impaired heavily and they find it extremely difficult to repay their loan installments as per schedule. To mitigate the problems of the borrowers and credit institutions during the period of drought, NABARD sanctions conversion of short-term loans into medium-term loans (MTC loans) for 3 years and reschedulement of earlier converted loans for a period of 5-7 years in the event of natural calamities. A quick study on MTC loans in Andhra Pradesh has revealed that 23 per cent of the sample farmers have faced problems of one or other type as associated with MTC crop loans. Farmers have reported that temporary relief from repayment of bank loan, lower repayment installment are certain merits associated with MTC loans. About 71 per cent have reported temporary relief from repayment as the major advantage of MTC crop loan. Besides credit, drought has its implications for both food- and water-security. Appropriate strategies have to be evolved in terms of appropriate crop planning, thrust on irrigation, watershed development, thrust on rural nonfarm sector for employment creation, etc. depending on the resource endowment of the arid and semi-arid regions.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aerrae:58458

DOI: 10.22004/ag.econ.58458

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