Chapter-4
Role of NABARD in Economic
Development of India
“Money is the source of all power. So give money, not by the way of charity, but by the way of credit so that your system will become viable and sustainable.”
- Muhammad Yunus1
NABARD has made commendable progress since its inception. The various measures taken by the national bank during the last few years and a large volume of financial accommodation which it has provided has been aimed at with a view to bring about and promote the development. These measures have certainly helped a great deal in strengthening the financial position of the cooperative credit structure. There has been a significant increase in the deposits and owned funds of the various cooperative credit institutions.
Over the years, the expectations from NABARD have been largely fulfilled. NABARD has transformed itself beyond an organization disbursing refinance to an institution pursuing a vision for the future of rural India. The strength of NABARD is its good networking capabilities. It acts as a coordinating agency for all the developmental works taking place at the grass roots level for rural areas. The greatest comparative advantage of NABARD is its ability to decontaminate the effects of subsidy and making public spending more efficient. NABARD works for progressive institutionalization of the rural credit and ensures that the demands for credit from agriculture including the new and upcoming areas like floriculture, tissue culture, bio-fertilisers, sprinkler irrigation, drip irrigation etc. are met.
The progress and economic development in a country like India really means reconstruction and resurgence of its rural communities which requires important infrastructure facilities that influence the economic development of the rural population. Therefore the role of NABARD becomes significant in India as an apex bank for refinance as well as for development activities in the field of agriculture and rural development in true sense. NABARD is going with the aim and logo of “Gaon Badhe Toh Desh Badhe”. For strengthening of NABARD, it is now required to make available more additional resources at the disposal of NABARD and active co-operation of various State Governments and agencies disbursing credit directly.
Development and Promotional Initiatives-
NABARD is continuously supporting various innovative initiatives in addition to its regular ongoing activities. These initiatives include programmes of the Indian Government and the State Governments, implemented in association with the banks for the development of agriculture and rural development. The on-going and new development initiatives of NABARD are diverse in coverage and inclusive in nature. These initiatives are as follows:
Credit Planning- Developing a strong and efficient credit delivery system which is capable of taking care of the expanding and diverse credit needs for agriculture and rural development is the fundamental base of NABARD’s mission. NABARD performs its credit function in three steps: at district level, at state level, and at national level.
District Level: In order to provide meaningful link between development and credit planning, Potential Linked Credit Plans (PLPs) are prepared annually to assess the realistic potential in each sector of agriculture and rural development with reference to natural and human resource endowments in the districts of each state. The sector wise credit flow projections captured in the PLPs are utilized for arriving at the credit flow target to agriculture sector and priority sector and also to provide useful information to State Government for overall development of the district level infrastructure with due convergence with other Government programmes. For preparing PLPs NABARD maps the potential available in farm and rural sectors that can be tapped with the formal credit and highlights the infrastructure and non-credit input support to be extended to sustain credit flow. PLPs form the basis in the preparation of Annual Credit Plans. During 2011-12, PLPs were prepared for 625 districts in the country.
NABARD also provides technical support in preparing Integrated Development Plans under Backward Regions Grants Fund. Till 2010-11 NABARD was involved in IDPs in 17 districts covering 5 states.
State Level: State Focus Papers (SFPs), presenting a comprehensive picture of potential available in various sectors of the rural economy, critical infrastructure gaps to be filled in and linkage support to be provided by various Government departments, are prepared by Regional Offices of each state by aggregating the potential estimated in PLPs for agriculture, allied and other rural sectors that could be tapped with institutional credit at the State Level, based on PLPs.
State Credit Seminars and discussions with the officials of associating State Government Deptts., financial institutions, Banks, etc., are organized for action planning in agriculture and rural sectors with credit and non-credit support to bridge the infrastructure gaps for facilitating potential credit flow.
National Level: NABARD facilitates Indian Government, RBI and State Governments in undertaking policy decisions regarding credit flow to agriculture and rural development at national level.
Farm Sector Initiatives- Indian farming is at crossroads and one of the major challenges is to reverse deceleration in farm growth. Main reason of this crisis is declining investment particularly public investment in farm R & D and irrigation, combined with inefficiency of institutions providing inputs and services including rural credit and extension. Other factors i.e., land fragmentation, out-dated tenancy laws, lack of modern market and rural infrastructure, inappropriate input pricing policies etc. are also responsible for agrarian and ecological crisis in the country. The crisis of stagnation in agriculture needs urgent attention.
The government has renewed focus on agriculture and promoting Public-Private Partnership to accelerate growth in the rural economy. The central as well as state governments are promoting involvement of corporate sector in agriculture. Many Indian and multi-national agencies have entered in Indian farm sector out of which NABARD is doing spectacular and exceptionally well in this direction.
NABARD is enhancing the flow of rural and farm credit through several schemes and innovative ideas. NABARD provides policy support for various farm sector initiatives aimed at accelerating GLC flow by rural credit agencies under investment credit. The GLC flow for farm and allied activities was only ` 46268 crore in 1999-00 which has been enhanced more than 10 times to ` 468291 crore in 2010-11. During this period of 12 years the GLC for production credit has been increased upto 12 times while the term Loans for hi-tech farming has shown the most remarkable increase of 61 times.
Due to the sincere efforts of the national bank, a slow but steady revolution is creeping in the Indian villages. Thousands of acres of wastelands have turned green, farm production now revolves round indigenous as well as new technologies, farmers are reaping good profits over their produce, the landless farm labourers are gainfully employed, the rural women have turned into entrepreneurs and the village economy is on an upward swing.
Table 4.2: NABARD’s Farm Sector Initiatives
Name of Initiative
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Introducing Year/ Associated with / Sponsored by
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Description
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Agricultural Commodities Futures (ACF)
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Not Available
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Provides low cost, more efficient and transparent market-based mechanism to manage risks and hedge the commodity price risks. Discovers future prices and promotes production, storage, agro-processing and farm marketing performance.
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Crop Insurance
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In pursuance of the Union Budget, 2002-03, AICL was established in 2002 with equity contributed by NABARD, GIC & 4 other insurance subsidiaries.
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Acts as an implementing agency of 'National Agriculture Insurance Scheme'. NABARD is actively involved through its concerned ROs and DDMs in successful launching and marketing of AICL’s insurance schemes. The pilot scheme of GIC for seed crop insurance has been transferred to AICI.
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Poultry Venture Capital Fund (Subsidy) (PVCF)
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DPVCF launched in 2005-06 was segregated into DVCF & PVCF during 2009-10 & w.e.f. 1.04.2012 replaced by PVCF providing the interest free loan & interest & capital subsidy.
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Encourages poultry farming especially in non-traditional States and in backward areas; improves production of poultry products; improves productivity of unscientifically run units through technology upgradation; improves hygiene of poultry meat; improves productivity and facilitate rearing of other poultry species which have good potential.
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Dairy Entrepreneursh-ip Development Scheme (DEDs)
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Dairy Venture Capital Fund was modified as DEDS w.e.f 1.9.2010 by replacing interest free loan with capital subsidy
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Provides self employment and infrastructure by promoting structural changes in the unorganized sector setting up of modern dairy farms, upgrading the quality and traditional technology to handle milk & encouraging heifer calf rearing,
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Tribal & Wadi Development Programme
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Created with corpus of ` 50 crore from out of NABARD’s profits for the year 2004-05.
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For comprehensive development of tribal families through Orchard development, livelihood support and improvements in quality of life.
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Farm mechanization
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Not Available
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Refinances for the purchase/renovation/replacement of farm machines; enhances the quantum of loan for repairs; reduces margin money requirement thereon to purchase; & removes the ceiling for the cost of replacing the engine of machines.
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Bio-Fuels
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Promoted by Planning Commission, Government, and NABARD
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Formal credit is provided for Jatropha cultivation on wastelands in forest and non-forest areas to promote eco-friendly and renewable energy crops
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Farm Innovation & Promotion Fund (FIPF)
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Created with corpus of ` 5 crores out of NABARD’s surplus for the year 2004-05.
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To encourage innovative projects in the farm sector through grant support
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Medicinal, Aromatic and Herbal Crops (MACs)
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Promotion of cultivation of MACs has been accorded special status by NABARD in accordance with the policy of Government of India.
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Ensures stable market & remunerative prices to MACs cultivators; promotes MAC cultivation in AEZs; prepares state-wise list of manufacturers/ traders; formulates bankable model schemes of high demand species; prepares & finalises the unit cost/scale of finance for MACs; & organises sensitization programmes for banks, NGOs & farmers.
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Financing Purchase of Land for Agricultural Purposes
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Providing assistance since August 2001 to boost the farm credit to increase farm production and productivity.
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Aims at refinancing the small and marginal farmers and share croppers/ tenant farmers to purchase, develop and cultivate agricultural and fallow/waste lands and to make SMUs economically viable.
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Agricultural Debt Waiver & Debt Relief Scheme
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ADWDRS was announced by Finance Minister, in his Budget Speech for 2008-2009
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Aims at waiving and relieving the farmers from their indebtedness.
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Capacity Building for Adoption of Technology
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Not Available
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Promotes technological up gradation and innovation through facilitation of adoption of new technology by farmers and entrepreneurs by exposing innovative projects through banks, corporates, NGOs, SHGs and FCs.
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Scheme for Agri Clinic/Agri-Business Centres (ACABCs)
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Launched by government through agriculture graduates with the support of NABARD
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Augments support and extension services for farming due to diversifying and modernizing farm practices. Provides input facilities, consultancy and self employment opportunities to technically trained persons to strengthen the transfer of technology and extension services
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Development of Bamboo Farming
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Introduced in consonance with the National Mission on Bamboo Technology and Trade Development.
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Changes ‘forestry mindset’ into ‘farm mindset’ regarding bamboo farming. Provides financial support to bamboo farming, processing and marketing to use it as wood substitutes and composites; industrial products; food products; and construction and structural applications.
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Agri Export Zones (AEZ)
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Introduced through a tripartite agreement of NABARD with APEDA and EXIM Bank in November 2002.
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For accelerating the export growth of agricultural produce with institutional credit in AEZs. To synergise the efforts and to leverage the respective strengths NABARD provides refinance in this direction.
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Farmers’ Technology Transfer Fund (FTTF)
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Operational w.e.f. 1.4.2008
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Organises farmers into informal associations, JLGs, producer groups/ companies or other ways for self help to facilitate adoption of appropriate technologies and dissemination of appropriate technologies and commercial intelligence.
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Contract Farming
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Introduced by appraisal of the private participation to promote capital inflow, assured agro market & technology transfer by National Agricultural Policy
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Makes arrangement for benefitting the farmers by quality inputs; technical guidance, assured market & price and the companies by assured availability of quality produce at pre-decided rates & assured market for products. Enhances farm income & also builds the company’s image.
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Farmers’ Clubs (FCs)
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Generated from VVV concept promoted by NABARD in 1982, to propagate the principles of “Development through Credit”
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Organises the members of FCs as SHGs/JLGs; provides them capacity building, leadership training and linkages with technology/markets; supports expenses of FTRDCs; & forms Federations of FCs/Producers’ Groups/ Companies.
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Watershed Development Programme (WDP)
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Created in 1992
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Develops micro watersheds in an integrated and comprehensive manner, to achieve sustainable production through peoples' participation with emphasis on soil and water conservation and rejuvenation of natural resources.
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Kutch Drought Proofing project (KDPP)
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Announced by the Honorable Prime Minister on 2001 out of PMNRF w.e.f 1.04.2005, it was entrusted to NABARD.
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KDPP is entrusted to provide relief; rehabilitation and reconstruction in the aftermath of the earthquake in Kutch. KDPP is being implemented through village Community Based Organizations (CBO's) and NGO's working in Kutch.
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Weather Based Crop Insurance Scheme
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The scheme is implementing since 2007-08 on pilot basis in selected states.
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The schemes provides insurance from the risks/ losses of crops incurred due to climate changes
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Kisan Credit Card Scheme (KCC)
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Introduced in August 1998
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Mitigates the difficulties of farmers in accessing timely and hassle-free credit for meeting their production credit needs & also provides them insurance against accidental death/ permanent disability.
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Umbrella Programme on Natural Resources Management (UPNRM)
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Started in 2007 with the contribution of GIZ of Germany.
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Supports sustainable NRM focused initiatives to improve the livelihoods of the socially marginalized/disadvantaged groups. Addresses the socio-economic disparities through ensuring equitable access to environmental resources and quality particularly for those who are most dependent on natural resources for their livelihoods
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Some of the appreciable initiatives by NABARD for these schemes are as follows:
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To face the difficulty of scarcity of fertile land for farming NABARD refinances the banks providing finance for purchase of land for agricultural purposes. During 2010-11, bank loan of ` 21 crore was disbursed to 464 borrowers with refinance of ` 19 crore in this direction.
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NABARD also provides valuable assistance for upliftment of tribal population. NABARD has created TDF to support integrated tribal development projects with wadi (a small orchard) as the core component. These projects provide sustainable livelihood for tribal families through orchard based farming along with social welfare measures to improve their living standards. Till now ` 1208 crores has been sanctioned covering 3,22,912 families in 415 projects.
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Irrigation is an important factor for farm productivity. Thus NABARD initiated WDP assisted under WDF. NABARD anchors 4 types of WDPs covering over 1.70 million ha. ; Indo-German WDP (IGWDP) in 4 States, Participatory WDP (PWDP) in 15 States, Prime Minister’s package in 4 States, and Integrated WDP (IWDP) in Bihar, supported by the Planning Commission. Till now 9.44 lakh hectares were taken with commitment of ` 1,023 crore under PMNRF package and about 620 projects has been taken by PWDP.
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NABARD promotes cultivation of crops in Agri Export Zones. For this ` 1111 crore refinance supports has been disbursed during 2002-03 to 2005-06.
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NABARD’s old initiative VVV has been transformed as Farmers’ Club Scheme organising farmers to facilitate accessing credit, extension services, technology and markets. Till now NABARD has launched 1, 01,951 such clubs.
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To augment support and extension services for farming to deal with the diversifying and modernizing farm practices, NABARD supports ACABCs through input facilities, consultancy and other services. Till now ` 11 crore for 537 units had been released under the scheme.
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Innovation is law of modern era. Thus NABARD is supporting farm innovation. Till now 164 projects with a support of ` 68 crore has been sanctioned under FIPF. NABARD also supports diverse and innovative projects for technology transfer in farming. Till now, ` 55 crore has been disbursed from FTTF in this regard. NABARD also provides financial assistance to the farmers who cannot hold the farm machineries on their own and also insures these machines. Moreover, NABARD also provides capacity building to farmers to adopt new/ innovative methods of farming, through training and exposure visits. During 2011-12, 339 such exposure visits for 9197 farmers were organized.
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To waive and relieve the farmers from indebtedness NABARD initiated ADWDRS which covers direct farm loans extended to ‘marginal and small farmers’ and ‘other farmers’ by Scheduled CBs, RRBs, Cooperative Credit Institutions and Local Area Banks as indicated in the guidelines.
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To combat with the severe problems of quantity and availability of energy sources and environmental impact of the combustion of fossil fuels, NABARD is promoting bio-fuels through Jatropha Cultivation.
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Dependency on monsoon and failure of crops due to natural/ physical hazards are ailing the Indian farming. Thus NABARD launched various crop insurance initiatives providing security for better margins and better returns over production such as; KCC and Crop Insurance schemes. During 2011-11, NABARD issued 10 million KCCs valued ` 54,269 Crore.
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Recognising the potential and benefits of contract farming arrangements, NABARD initiated to support such arrangements by the banking sector and special refinance package. NABARD conducts crop specific studies, workshops and exposure visits for better interfacing among farmers and entrepreneurs; sensitises stake holders and bankers; follows-up with NAIC for insurance of crops grown under these arrangements in AEZs; and initiates for expansion of scope of contract farming for medicinal plants. In this direction NABARD has provided refinance support of ` 268 crore during 2005-06.
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To enable the farmers to reap the benefits of commodity futures trading, NABARD provides ACFs to manage risks and to help in establishing efficient farm markets. During 2008-09, 8 workshops were organised for exposure/ skill upgradation of farmers to ensure their participation in the market.
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To promote production of dairy and poultry products NABARD has sanctioned till now, ` 174 crores for 18184 units under DVCF; ` 48 crores for 633 units under PVCF; ` 124 crores for 29297 units under DEDS (earlier known as DVCF) and released ` 4 crores for establishment of 189 units under PVCF (subsidy).
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Depletion of natural capital and attempts to move to sustainable development has been a major focus of development agencies in recent years. Conservation of natural resources is major focus of Natural Capitalism, environmentalism, the ecology movement, and Green Parties. Thus NABARD and GDC have launched UPNRM with total disbursement of ` 132 crore till now.
Although NABARD has been directly/indirectly facilitating processes to address the challenges of farming yet the needs of farm sector are enormous. NABARD has to facilitate sustainable and equitable growth of farming both across regions and social groups through enhanced farm growth by ensuring that credit growth translates into real sector impact. The total amount of farm credit has grown remarkably; but no significant improvement in farm productivity had been seen. At the same time the number of accounts has not grown commensurately which means that credit flow to smaller farmers has not reached in sufficient measures. NABARD should initiate more innovative projects and has to ensure that the credit flow to small farmers should be adequate in meeting their needs.
NABARD should consider widening partnership with potential commercial, industrial and business houses involved in agribusiness, such as seed, fertilizer, pesticides, farm machinery, manufacturing, farm processing and exports, farm technology investment, biotech industries etc to improve farm production, procurement, processing, preservation and storage that can usher in second green revolution, substantially enhance farmers’ income on one hand and stabilize food prices on the other since these houses can bring technology, managerial skill and marketing strategy in rural areas.
Non-Farm Sector Initiatives: Farm and Non-Farm Sector in rural areas are complementary to each other to improve rural economy and development of both together holds the key to the faster economic prosperity of rural areas. RNFS has significant untapped potential and promise to generate employment and income in the rural areas, while arresting the migration of rural population to urban areas in search of livelihood opportunities. NABARD has identified RNFS as one of its thrust areas for financing, development and promotion. Although not defined in any official document of Government but by connotation RNFS covers all rural off-farm and non-farm activities in secondary and tertiary sectors of economy. It includes enterprises and artisan activities classified as; household; decentralized; tiny, SMEs involved in production/ manufacturing, processing, preserving, storing, marketing of goods and/or services and agro processing activities providing employment and income to rural residents.
To facilitate the share of RNFS in Indian economy NABARD is trying to be in constant touch with emerging needs for credit in rural small/ industrial/service enterprises and to refinance/direct finance these units; to promote rural entrepreneurship and enterprises jointly with promotional and developmental agencies; to introduce a bias in credit delivery and other professional means in favour of women, weaker sections and resource poor regions; to bring about an awareness on environmental impact of rural credit projects; to disseminate its own experiences on financing and promoting RNFS; and to facilitate a policy environment conducive to the above objectives.
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