Risk of Financing Agriculture in the North-Eastern Hill Region of India with Special Reference to Meghalaya

The study pertains to the economic issues of risk and uncertainties associated with financing hill agriculture from the twin angles of risk of farmers to utilize the credit and of bankers to disburse the agricultural loan. The issues discussed are: first, why the financial institutions are reluctant to lend agricultural advances? Second, whether the farm income or rate of return on equity and non-equity capital is sufficient to repay the loan? Third, what are the major sources and the magnitude of risks and uncertainties associated with hill farming? Fourth, nature of agricultural marketing situation and how it affects the farm income in this region and finally, the possibilities have been explored, where and how the agricultural lending can be stepped up with positive economic return? The study has revealed that agricultural farming in north-east region of India is severely constrained by high risk and uncertainty arising out from various factors. Under the prevailing condition the expectation of a steady and assured income from agriculture is quite limited; hence, the hill farming fails to attract considerable private investment. The prevailing risk and uncertainty situation compels them to operate at low-input and low-output subsistence farming with low volume of marketable surplus. It has been found that the financial institutions face difficulty in financing the hill agriculture in view of low repayment performance and increasing non-performing assets for agricultural loan. Also, the absence/poor performance of crop insurance scheme (presently only Meghalaya and Sikkim are implementing the National Agricultural Insurance Scheme) increases the risk of hill farming considerably. Non-availability of reliable agricultural database (time series as well as cross section) on area, production and yield, cost of cultivation has been found the major impediments for implementing the crop insurance scheme efficiently. The agricultural situation in this region is highly heterogeneous; variability is extremely high even within a few kilometres of area. It has been suggested that suitable methodologies followed by a wide database be developed to estimate the yield and cost of production of horticultural crops which will help policymakers to formulate right policy to protect the interest of farmers as well as smooth functioning of all stakeholders — entrepreneurs, private investors, bankers and crop insurance implementing agencies.


Issue Date:
2005
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/58463
Published in:
Agricultural Economics Research Review, Volume 18, Conference Number
Page range:
83-102
Total Pages:
20




 Record created 2017-04-01, last modified 2017-08-25

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