The long-term neglect of agriculture as reflected in the
falling real investment, rising input costs and inadequately
remunerative prices lead to fall in agricultural production
vis-à-vis requirements. Despite spectacular expansion
of bank branch network since 1969, a substantial proportion
of rural households still remain outside the coverage of
the formal banking system. Cumulatively, the sharply declining
farm income is leading to suicides by farmers. Amidst the
crisis, what remained as eternal is farming community's
desperate search for fresh credit for the ensuing season.
The current agrarian crisis thus, calls for radical policy
alternatives. Against this backdrop, this article examines
the need for effective delivery of credit at an affordable
cost to the vast sections of disadvantaged and low-income
groups who tend to be excluded from the formal banking channel
and argues for constituting a new pan India bank for rural
credit by transferring the existing rural branches of Public
Sector Banks (PSBs) and Regional Rural Banks (RRBs) to it
to serve the needs of rural population with a totally new
culture. For, such State intervention in the form of `capitalist
guided market economy' alone can ensure `inclusive growth'
With the advent of economic reforms, India has been witnessing
a phenomenal growth in its economy. The GDP, at factor cost
in 1993- 94 prices, has increased from Rs. 4,01,100 cr as
on 1980-81 to Rs. 15,29,400 cr by 2004-05. The GDP at current
market prices as projected by the Central Statistical Organisation
is Rs. 46,93,602 cr in 2007-08, and at factor cost at constant
1999-2000 prices it is projected to grow at the rate of
8.7% in 2007-08. This newfound growth has, of course, thrown
many challenges at the policy makers:
The gap between the rich and the poor has been widening.
The income/consumption inequality as measured by Gini Index
has increased to 30.5% in 2004 from 27.7% in 1994.
Agriculture—the mainstay for 65% of the population—has
been marginalised. There is an increasing apprehension among
economists that even additional investment in agriculture
to push its growth rate from the present 2.5% to 4% and
thereby create additional employment, may at best add only
0.24 percentage points to the GDP, and this may not mean
much for the already marginalised rural masses, especially
in the context of the declared goal of `inclusive growth'.
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