An Overview of Agricultural Credit and Crop Insurance in Bihar

Singh, R.K.P. and Singh, K.M. (2013): An Overview of Agricultural Credit and Crop Insurance in Bihar.

Abstract

Bihar has a large agrarian economy of over Rs 250 billion with more than 80 percent of rural population subsisting on farming. Agricultural work force increased more than two-fold from 126 lakh in 1981 to 265 lakh in 2006 whereas net sown area declined by about one lakh hectares and gross cropped area has been stagnating at 80 lakh hectares during the period. Due to increase in number of agricultural labour force in Bihar, per agricultural worker annual real productivity (at 1980 prices) has declined from Rs 1977.00 in 1980-81 to Rs 1278.00 in 2005-06. Among the major states in India, Bihar is at the lowest ladder in terms of proportion of institutional loan to total loan disbursement to farmers. The high indebtedness to money lenders may be an important reason for indifferent attitude of farmers towards lending institutions, resulting in low investment and low productivity in Bihar. An assessment of the situation at ground level indicates that recourse to non-institutional credit continues to dominate as far as rural areas and agriculture sector are concerned. The study recommends interest rate on co-operative agricultural loans be reduced to 3 per cent in Bihar for benefit of farmers. It will motivate farmers to approach cooperatives for agricultural loans who are still not inclined to contact commercial bank branches.

Agricultural insurance offers protection against losses caused by fluctuations in the output of a crop from one year to another or from one crop season to another. Its objective is to stimulate and support the production of principal crops in the country. Providing financial support to farmers in the event of crop failure, it makes farmers credit-worthy for the next crop season. It has been observed that the majority of small and marginal farmers, as well as tenant farmers and farm laborers bear the brunt of crop failure. However, the performance of National Agricultural Insurance Scheme has also been unsatisfactory in Bihar. Despite change in form of crop insurance scheme and establishment of Agricultural Insurance Company Ltd. the regional disparities in crop insurance still persist. It is accordingly recommended that a campaign be launched in rural areas to create awareness among farmers about crop insurance involving, inter alia, non-loan taking farmers because a large number of farmers are still not in a position to avail crop loan facility from institutional agencies in Bihar.

• Item Type: MPRA Paper
• Language: English
• Keywords: Agricultural credit, Crop insurance, Weather-based insurance Bihar, India
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q14 - Agricultural Finance; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q18 - Agricultural Policy ; Food Policy

References

Singh, R.K.P. A.Kumar and Singh, K.M.1993. Crop Insurance : An Overview.Indian Farming. 42(10): 31-32

R.K.P.Singh, Arvind Kumar and K.M.Singh. 1993. Crop Insurance : An Overview. National Bank News Review. 9 (1): 29-30.

Sharma, N. and Singh, K.M. 1998. Development Constraints in Institutional Finance in Bihar. In: Flood Devastation and Agricultural Development In Eastern India: Vol 1. Ed: B.N.Verma. B.R.. Publishing Corporation, New Delhi, pp. 217-232.