Lack of formal finance may be driving farmers to suicide: RBI governor

CHANDIGARH: Reserve Bank of India (RBI) governor Raghuram Rajan on Friday claimed that the 'complex problem' of farmer suicides could be arising out of lack of formal finance and not excessive burden of it. "In the last few days, the tragic picture of farmer suicides has emerged. Researches have found that it is a complicated matter to say why someone will take the extreme step of ending his life. Farmer suicide is a problem that one should neither take lightly nor offer too easy explanations for," said Rajan at an interactive session organized by Centre for Research and Industrial Development (CRRID) here.

"The studies that I've seen suggest that a variety of factors come into play. Often, it is the lack of formal finance rather than excessive burden of finance which is the problem," he added. He, however, underlined that the problem needs reasoned and not simplistic answers.

The issue of farmer suicides came up while he was replying to a question by Satish Verma, RBI chair professor, CRRID, about non-institutional sources of credit through arthiyas (commission agents) in rural areas of Punjab. Rajan said that their dominance can be challenged only with expansion of formal banking sector in all areas.

"New attempts have been made to take formal finance to every corner of the country and the Jan Dhan Yojna is a step in this direction. Besides, new priority sector norms have been introduced with specific limit for small and marginal farmers so that 7-7.5% of the lending is to those who are otherwise excluded," said Rajan.

A recent study by Dr Satish Verma had pointed out, "The commission agent is the sole contributor of non-institutional loans in banked villages and the largest in unbanked ones."

Putting to rest doubts about the 'Made in India' campaign, Rajan said that it didn't have to be necessarily export-oriented given the feeling that consumption has taken a dip world over. He said that the produce could be consumed in the domestic market as well and the end consumer should not decide the terms of the growth.

Earlier, Rajan tried to decode the aftermath of the global meltdown and said that there are many explanations to it but India would eventually come out of it with efforts like more focus on the manufacturing sector and impetus to small-scale industries.

The RBI governor was of the view 'Made in India' could help bail out agriculture sector as well, as there was a need to recognize the fact that it was a low production sector and it involved a lot of risk as manifested in the damage due to untimely rains. The solution lies in increasing productivity and also focusing on allied activities. There should be opportunities outside agriculture so that farmers have the option to leave farming to take up part-time jobs, he said.

http://ift.tt/1vH4wR7 Rajan,Farmer,chair professor,Bank of India

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