What are the benefits of the Special Liquidity Facility, and what lateral benefits do you expect from the additional liquidity?
The Special Liquidity Fund – released last year – of Rs 25,000 crore was a major initiative by the government to offset the effects of the pandemic. When the RBI figured out they wanted to inject liquidity into the system, they passed the returns from the Rs 25,000 crore they had given to NABARD last year to cooperative banks and RRBs. You can see the results, how credit has grown in the agriculture sector, the cooperatives and RRBs have done wonderfully, as well as commercial banks. This year, the MPC also has again decided that RBI will give Rs 25,000 crore to NABARD and we are very confident that this year also agriculture growth is going to have a higher trajectory.
Rural economy indicators suggest good growth and recovery, but are there signs that this momentum is sustainable?
Last year, when the Indian economy went into a spin, most of the sectors weren’t doing well. Agriculture – which works year round – never stopped, and we had confidence – even then – despite the pandemic and lockdowns that the sector is going to perform very well. That really beefed up our belief that this year – FY21 – the target was Rs 15 lakh crore and by February it was around Rs 13.7 lakh crore for the credit disbursement; by March it must have surpassed the Rs 15 lakh crore, and this year the target is Rs 16.5 lakh crore. Maybe there is a small incremental improvement, I’m very confident that it’s going to do well.
Now, why is the rural economy doing so well? There are few reasons we’ve analysed – first, the supply side factors, because last year, the government had initiated a top management package and given the third tranche exclusively for agriculture. Then, RBI had the TLTRO, reduced CRR and pushed quite a lot of liquidity into the sector.
Secondly, the government had initiated multiple solutions – like the relaxation of work related to lockdown conditions – which are important. Another one is the way the government had worked with alacrity, allowing accredited warehouses to work as procurement centres under E-NAM and ensuring the supply chain isn’t affected. Giving insurance cover to more than one lakh people to go to the FCI officers, as well as labourers, which ensured that the whole system was kept running, so most agricultural operations went ahead without any problems.
The other major thing which we observed was that procurement operations by the government had done a wonderful job – procuring over 38 million tonnes of wheat by June. Now, the kharif season is has already here and by March 25, almost 46 million tonnes of paddy have been procured. These really made the rural economy pick up, as well as the PM Kisan initiatives and higher procurement prices.
While your disbursements have been higher, could you tell us that what is the token of disbursement in terms of the size and quantum? Has reach gone higher?
Regarding credit, yes, if you look at it, on an average credit growth in agriculture – during the last decade – was close to 12% to 13%, and this year despite the pandemic the credit growth was close to around 9.9% to 10%. That’s substantial, especially when other sectors are posting negative growth or dismal growth. So, now that indicates that agriculture as a sector had done very well.
Regarding the term loans that have picked up, this was very substantial and profound to happen during this year, plus so many investments have happened both in the public and private spaces in agriculture, in the rural areas. Now, in fact, I can say that 42% of the agriculture credit that has gone during the year FY21.
We have moved to only term lending, which could be for micro irrigation structures, pump sets, tractors, maybe animal husbandry, fisheries or anything that indicates people are doing their job, producing whatever they can.
Credit growth was facilitated by multiple factors, including a decent monsoon, in a substantial way.
You did rather well in FY21, so, how will your numbers look like? Considering you had a decent base last year?
Last year, despite the pandemic, agriculture grew at 4% and credit also grew substantially. At the same time, we have made the analysis that our requirement of credit for agriculture for the year FY22 is Rs 16.5 lakh crore, which is roughly around 10% over the previous year. So, that way, despite the base effect I think 10% growth rate in credit will happen, while agricultural growth, I am expecting maybe close to around 4% to 4.5%, subject to very good monsoon. Plus, there is the pandemic. If India’s COVID-19 situation gets contained, maybe in the next one or two months by the time kharif operations start, I think there will be absolutely no stopping agriculture growth.