Friday, October 30, 2015

Reforms required in the functioning of Cooperative Societies in Rural India

Agricultural finance has a black history in India whose evolution into a pathetic practise started right after the occupation of Bengal by the East India Company in 1757. In rural areas any agricultural lending done by the cooperatives is on a not for profit basis so the party lending has no implicit motive to earn profit whereas other commercial parties would strive to earn profit which may lead to the exploitation of rural masses. But this is only one side of the story. Corrupt officials in cooperative societies can exploit rural masses for their personal gains and commercial organisations for optimum profit can bring in efficient lending practices which are the need of the hour. So what we need right now is a judicious mixture of cooperative intent and business efficiency.

Some problems faced in rural areas are as follows - 

1. Inadequate financial inclusion. A big proportion of Indian rural populace has no access to banking facilities.

2. Due to lack of options farmers in rural areas resort to informal money lenders (munshi, zamindars, shroffs) at exorbitant rates of interest.

3. Lack of advanced technology to promote efficient agricultural practices.

4. Unscientific agricultural practices for eg. excessive use of Urea without considering soil requirement.

5. Political decisions which promote unhealthy habits such as waiving of agricultural loans before election. This is being done for quite some time now so farmers after taking loans have in the back of their mind that their loan will be called off in future.

Some steps that can be taken to improve the prevalent conditions -

1. Video conferencing between authorities and rural masses advising them regarding financial inclusion and sound agricultural practices.

2. The recently launched soil health card will tell them the best possible set of crops to grow and also the fertilizers to use in appropriate proportions.

3. Internet enabled biometric authenticated point of sale machines can be used to provide money to rural masses without leakage.

4. The flagship JAM (Jan Dhan + Aadhar + Mobile) trinity can be used to provide them credit.

So we can say that agricultural finance in rural areas is a cumbersome process which requires combined efforts from Central Government, all State Governments, Commercial Banks, local authorities and all stakeholders involved.

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