Can tech sow the seeds of a bumper harvest in India’s agriculture?
India’s quest for agricultural growth is not unlike Captain Ahab’s pursuit of the giant white whale in?Moby Dick. It is obsessive yet elusive, and for a number of reasons. A big one being that while the intention to develop the sector is there, navigating the diversity of the subcontinent’s topography is a task no tried-and-tested playbook can help accomplish.
“It is not down in any map; true places never are.”?- Herman Melville
Landscapes and lending
Credit distribution to the agricultural sector has been on the rise - during the 2010s, agricultural credit saw a per-annum average?increase?of 16.5%; and the Budget this year?allocated?Rs 20 lakh crore to the sector, an increase of 11% from last year.
However, there is plenty of evidence proving a serious disparity in credit allocation to various regions within the country. In FY22, southern India saw a disbursement amounting to ~Rs 9 lakh crore, while the corresponding numbers for the northern, eastern, central, and western regions stood at Rs 3 lakh crore, Rs 2 lakh crore, Rs 2.4 lakh crore, and Rs 2.27 lakh crore respectively. The numbers especially don’t favour the northeast, which was disbursed only Rs 14,000 crore during the period.
Similarly, the agricultural credit disbursement per hectare in southern India exceeded other regions by a lot.?The reason being superior infrastructure, and better outreach and delivery of credit in those states.
The numbers in favour of the southern states appear to be an anomaly, for two reasons:
The southern states make up only 16.96% of the gross sown area (GSA), but enjoy 44.61% of agricultural credit disbursed. Meanwhile, central India accounts for 22.77%?of the GSA, which gets only 13.88% of the total agricultural credit in India. The northern region has a 20.96% share of the GSA and 19.23% of the agri credit disbursed.
Other than the fact that credit delivery mechanisms are more evolved in these states, there is also evidence to suggest that 71% of agricultural loans in the South are outside of the Kisan Credit Card (KCC) scheme, and have been taken against gold.
Data from the RBI’s Internal Working Group also helps shed some light on?regional disparity?in the distribution of agricultural credit - disbursements to southern states are not in line with their agricultural GDP.
The IWG speculates that the disparity indicates a possible diversion of agricultural credit towards non-agricultural purposes in the South. Which brings me to my next point…
…the nuances of agri credit usage
Unlike other sectors, credit usage in agriculture has an indirect impact on output and income. It is used by farmers to buy inputs like fertilisers, seeds, and equipment. This makes it harder to find a direct correlation between agricultural credit and production, although its influence is extremely critical for agricultural growth.
Another interesting point to note is that over-reliance on an erratic monsoon, changing weather conditions, and deteriorating soil quality (among a host of other factors), often result in unreliable harvests. Agricultural credit, therefore, is widely used for purposes of consumption during difficult times.?
As a result, in the absence of clear evidence of?productivity, it is extremely difficult to measure the impact of agricultural credit on production and sectoral growth. Then, this is a hard question to answer - does more agricultural credit in southern India equal improved growth??
Can data make agri credit distribution equitable?
Even as overall credit to the sector continues to grow each year, the demand and supply of credit across regions in the country remains lopsided.?
Policy-level interventions applicable to all regions exist. They place an emphasis on the growth of credit distribution channels and outreach to improve demand, infrastructural changes, and most important of all, digitisation. Here are a few:
But how can we correct for regional disparity? Sensitising state governments to the benefits of giving banks easy access to land records, as well as increasing and allocating a large portion of the RIDF corpus in credit-starved areas are some of the high-level recommendations made by experts.?
However, the federated digitisation and exchange of agricultural data is a key piece of the puzzle.
Let’s talk about the Agristack. It is a critical piece of digital public infrastructure that aims to solve for the gaps in credit access and distribution to the sector. It will act as a centralised database on top of which services around credit, advisory, and agri inputs can be built. But more importantly, it promises to be a federated structure, with the ownership of the data solely with the states.?
Where the?Agristack?is a database, the Agricultural Data Exchange - a platform that will facilitate the?exchange?of agricultural data - has just been rolled out by the government of Telangana, IISc Bengaluru and the World Economic Forum. Modelled after the?Account Aggregator framework?for pure financial services, the ADeX will host data sets owned by various Agricultural Information Providers (AIPs) that can be consumed by Agricultural Information Users (AIUs) like agtech developers to create valuable offerings.
The ADeX makes data around meteorology, soil quality, marketing and more from local agencies, both government and private, available for consumption. Data will be available on not only regional, but a hyper-local level, empowering agtech companies to develop tailor-made credit products, contextual underwriting logics, and customised debt recovery mechanisms, just to name a few.
It is imperative that control over the selection and ownership of data sets on this infrastructure remain with the states. This would ensure that agricultural credit is disbursed where it’s due, and its utilisation remains productive, contributing to an equitable growth of the sector on a national scale.
That's all from me this week!
Written by Rajat Deshpande
FinTech | Data | Value co-creation | Partnerships
1 年Interesting and seems possible!
Product Lead at FinBox | Writes about Embedded Finance
1 年Great!