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Indian Agrarian Crisis

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The Agrarian Crisis in India: The Root Causes
The declining contribution of the agriculture sector towards India’s GDP is questioning the status of this sector as the backbone of the economy. With time agriculture is turning into an economically unviable activity with almost no profitability pushing the sector in a state of crisis. The following report analyses how the agrarian crisis can largely be attributed to the economic reforms in India since 1991. Lack of Easy Credit to Agriculture and Dependence on Money Lenders
In 1969, 14 major commercial banks were nationalized with one of the objectives of developing banking sector in rural areas and providing easy institutionalized credit to the farmer. Soon these banks became the major source of affordable credit in the rural market particularly for the small and marginal farmers. However in the era of neo liberalization, since 1991, the nationalized banks started reducing their commitment below the prescribed 18 per cent, while the cooperative banks turned sick and failed to provide credit. With the implementation of the recommendations of the Narasimham Committee on Banking Reform post 1991, some of which included the decontrol of interest rates, large scale closure of rural branches for rationalized branch networks, the national effort towards developmental and social banking for farmers came to an end. This squeezed credit lines to farmers and led to a drastic fall in the credit flow to agriculture. In Andhra Pradesh for example, the proportion of bank lending to agriculture fell from 43% in 1998 to 26.7% in 2003, covering only one-third of the credit needs of the farmers. This crisis of unavailability of credit from formal sources forced the farmers to turn to moneylenders despite the high interest rate (often as high as 36% -100% compound) charged by them. Unable to replay the loan, the farmers are

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