NABARD study on farm household

Context: NABARD has released its report on All India Rural Financial Inclusion Survey 2016-17.

Definition of agricultural household:

The survey covered a sample of 1.88 lakh people from 40,327 rural households. Only 48% of these are defined as agricultural households, which have at least one member self-employed in agriculture and which received more than ₹5,000 as value of produce from agricultural activities over the past year, whether they possessed any land or not.

Highlights of the survey:

Outstanding debt:

• More than half the agricultural households in the country have outstanding debt, and their average outstanding debt is almost as high as the average annual income of all agricultural households.
• NABARD found that 52.5% of the agricultural households had an outstanding loan on the date of the survey, and thus were considered indebted. For non-agricultural households in rural India, that figure was 10 percentage points lower, at only 42.8%.
• Agricultural households reporting any outstanding debt also had a higher debt liability compared with non-agricultural ones.
• The average debt of an indebted agricultural household stood at ₹1,04,602 in comparison to ₹76,731 for indebted non-agricultural households.

Reasons for taking loans:

• The biggest reason for taking loans among agricultural households was capital expenditure for agricultural purposes, with a quarter of all loans taken for this purpose.
• While 19% of loans were taken for meeting running expenses for agricultural purposes, another 19% were taken for sundry domestic needs. Loans for housing and medical expenses stood at 11% and 12%, respectively.

Distribution:

• While all classes of farmers had debt, the highest incidence of indebtedness came from those owning more than two hectares of land. In that category, 60% of households are in debt.
• Among small and marginal farmers owning less than 0.4 hectares, slightly less than 50% of the households were in debt. Those with more land were more likely to have multiple loans.
• This may be attributed to the fact that these economically better-off households are more eligible for taking loans as they have enough assets to serve as security against the loans taken.

State- wise variation:

The southern States of Telangana (79%), Andhra Pradesh (77%), and Karnataka (74%) showed the highest levels of indebtedness among agricultural households, followed by Arunachal Pradesh (69%), Manipur (61%), Tamil Nadu (60%), Kerala (56%), and Odisha (54%).

Sources:

Looking at loans taken between July 2015 and June 2016, the survey found that farm households took less than half their loans from commercial banks. While 46% of the loans were taken from commercial banks, and another 10% from self-help groups, almost 40% were taken from non-institutional sources such as relatives, friends, moneylenders and landlords.

Annual income of households:

According to the survey, the average annual income of an agricultural household is ₹1.07 lakh. That is barely ₹2,500 more than the average outstanding debt of indebted farm households.

Sources: the hindu.