Reforms in Financial Institutions
Most of the farmers on the eve of Independence were poor. Hence, financial institutions were reformed as below:
- Bank nationalization and Priority Sector Lending mandate helped in the betterment of credit facilities to farmers. This increased agriculture credit forty times within the first decade of nationalization. At present, 18% of all loans are to be given to the agriculture sector by commercial banks.
- National Bank for Agriculture and Rural Development (NABARD) was established in 1982 to boosting financial credit to agriculture as one of the aims. The most significant step in this direction taken by NABARD is Kisan Credit Card (KCC) scheme, which was started in 1988. Using KCC, a farmer can withdraw funds for farming and domestic needs.
- Regional Rural Banks concept was introduced in 1975 to meet the local demand of rural areas for agricultural credit and other banking facilities. Over 40 RRBs have been set up in India so far.
- Crop insurance was introduced in 1972 to reduce the vulnerability arising out of low irrigation potential and irregularities of monsoon. However, it was in 1985 when the government started offering a widespread Comprehensive Crop Insurance Scheme (CCIS). This was replaced by National Agriculture Insurance Scheme (NAIS) in 1999. Both CCIS and NAIS suffered from the problem of claims higher than premiums.
- Pradhan Mantri Fasal Bima Yojana initiated in 2016, has subsumed all the crop insurance schemes. The premium rate is 1.5% for Rabi and 2% for Kharif crops and 5% for annual commercial and horticultural crops. There is no upper limit for Government subsidies.
Technological and Institutional Reforms of Indian Agriculture
Reform is the engine of development, without which no amount of fuel (money) can make things move forward. Since India is a “Krishi Pradhan Desh“, where more than 60% of the workforce is involved directly or indirectly with this agricultural sector, reform in agriculture is one of the most important aspects of policymaking in India for inclusive development.
At the time of independence, Indian agriculture needed desperate reforms due to:
- Vulnerability due to uneven distribution of water resources
- Inefficient farming
- Dependency of about 85% of population
- Deterioration under British colonialism
- Need of raw materials to kick start the manufacturing sector.
To tackle the above challenges, the First FYP focused on increasing the area under irrigation and developing ancillary industries for agriculture. The plan was a huge success and led to an increase in production and stabilization of the economy. With the focus of the Second FYP shifting to the secondary sector, agriculture suffered a setback, with India plummeting into a food crisis.
Technological and Institutional Reforms