Rural debt and the Budget

ABSTRACT:-
The issue of loan waiver to agriculturist. The farmers in India have been living in very abysmal
condition and the recent spate of farmer’s suicides has kept the issue alive in public.

It is well known fact that farmers in India rely heavily on non institutional sources of credit .the
national sample survey published a report on the in disputes of farmers house hold . According to
the survey only 57.7% of the outstanding loans taken by farmers from institutions such as banks ,
cooperative societies or other govt. agencies and the rest of 42.4% from non financial institutions
like moneylenders, traders, friends or relatives . while the variations in states is very high more
than 80% of the loans In Maharashtra and Kerala are from institutional sources .Bihar, Assam
and Andhra Pradesh more than 60% of credit being taken from institutional sources and states
like Manipur and Meghalaya more than 80% of the credit from non-institutional sources and
only 6% of the credit in Meghalaya being taken from institutional sources. The following graph
shows the credit variations from different agencies and the five most affected states by the
incidences of farmer suicides.
In spite of the various effort were made by the govt to provide credit facilities to the farmers,
there is a large gap between the govt policies and its implementation that’s why a large part of
farmers move towards the non financial institutions for loan. on the on the other hand the credit
facilities for the farmer cannot be undermined and the seasonal nature of agriculture farmers
need to invest a large amount of money at the beginning of the crop life cycle the money is used
for the seeds fertilizers and it is classified under the direct institutional credit to the agriculture
for the short term loan. Direct finances also include medium term and long term loan which
mainly for the purchase of agricultural machine and tools etc for the development of irrigation
facilities. And other types of direct finances include loans to plantation, development of allied
activities such as fishery, poultry etc and also establishment of bio-gas plants, purchase of land
for agricultural purposes. But the rate of increase of loan had issued has gone up significantly
after 1990. The above graph shows the total direct institutional credit facilities for different years
of short and long run for agricultural facilities.

.SHORT TERM

In the case of direct institutional credit to agriculture in the short term, the rate of growth of loans
issued and loans outstanding is similar. From the banks’ point of view, a loan is termed as
outstanding as soon as it is issued Repayments against that loan are then deducted from the
outstanding loan as and when they are received by the bank. Thus, a small gap between loans
issued and outstanding loans indicates that most individuals do not default on the repayment
schedule of the loans in the short term.
LONG TERM

In the case of long term direct institutional credit, however, the gap between loans issued and
loans outstanding has been widening over the years. The rate of growth of both loans issued and
outstanding loans has increased post 1990. The increase in outstanding loans is much greater
than the loans issued. As long term loans are for investments such as agricultural implements or
construction activities related to agriculture, they involve fairly large sums of money.

CONCLUSSION

As per the point of view of the bank the impact of loan waiver from the bank may not be very
severe .a large part of loan to the farmer have been outstanding or have been classified as non
performing assets .In terms of the functioning of the bank this money was, in any case, not
available to the bank Waiver of these loans would surely serve as a morale booster to the farmer,
but from the point of view of the credit agencies, the impact may only be an accounting formality
on paper