Rural debt: Scenario

In most parts of the country, farmers are burdened by voluminous debts that contribute to the
problems in the agriculture sector. Several committees, several studies followed by reports
thereon, different aids from the Central and State Governments have not been effective in
reducing rural debt. While the rest of the economy is growing at a stupendous rate of 11 percent,
agriculture, one of the primary sources of livelihood for majority of the Indian population, has seen
a stubbed growth rate of 2.3 percent. Unpredictable rains, small landholdings, high interest rates
on loans from private lenders are some of the reasons that have pushed rural farmers into debts
they cannot reasonably pay back.

Radhakrishna Committee Report

The Radhakrishna Committee Report is based on a latest study conducted on rural indebtedness
in India by the ‘Expert Group on Agricultural indebtedness’ under the leadership of Professor R.
Radhakrishna. According to the report, the Government has failed to optimally utilize its $4.3
billion package meant for 31 districts in Andhra Pradesh, Maharashtra, Kerala and Karnataka.
The Committee has suggested urgent measures to aid the farming population and prevent further
suicides.

Recommendations of the Radhakrishna Committee Report

Some of the recommendations of the committee report are:

• To enable rural farmers to repay debts owed to private moneylenders, the committee has
suggested that the Government create a Rs100 crore fund ($25.6 million) and use it to
extend long term bank loans to farmers.

• The committee also recommended that the relief package be extended to a total 100
districts that have been identified as low land productivity areas with a credit to deposit
ratio of less than 40 percent. A special Agricultural Development Fund to meet the special
agricultural development plans is also suggested by the committee.

The exact measures to be implemented to avert further rural debt crisis in India were decided
upon by Prime Minister Manmohan Singh in a meeting with the Finance Minister, Agriculture
Minister and other members of the Indian Government.