Economic Survey 2023-24: Agricultural credit saw 1.5X jump in FY24 (2024)

The Economic Survey 2023-24, tabled in Parliament by Union Finance Minister Nirmala Sitharaman on Monday, reported significant double-digit growth in credit to agricultural and allied activities during the financial year 2024. Agricultural credit increased nearly 1.5 times, from Rs 13.3 lakh crore in FY21 to Rs 20.7 lakh crore in FY24. Despite this increase in credit, Gross Value Added (GVA) in the agriculture sector grew at a slower pace due to erratic weather patterns and an uneven spatial distribution of the monsoon in 2023.

The Survey highlighted the crucial role of the Kisan Credit Card (KCC) scheme in providing timely and hassle-free credit to farmers. By the end of 2023, there were over 7.4 crore operative KCC accounts. In April and May 2024, bank credit to agriculture and allied sectors grew by 19.7 per cent and 21.6 per cent year-on-year, respectively.

"The shares of the agriculture, industry, and services sector in overall GVA at current prices were 17.7 per cent, 27.6 per cent and 54.7 per cent respectively in FY24," the survey mentioned.

Total foodgrain output for FY24 saw a marginal decline of 0.3 per cent, according to the third advanced estimate of foodgrain production released by the Ministry of Agriculture and Farmers' Welfare (MoAFW). Despite these challenges, several government initiatives have been launched to address crop insurance concerns, including YES-Tech Manual, WINDS portal, and the enrolment app AIDE/Sahayak, which assess crop damage using satellite-based advanced technologies and door-to-door enrolment initiatives.

Indicating a likely rise in agriculture premiums from 2024 onwards, the survey mentioned an average real premium growth of 2.5 per cent over the medium term supported by improvements in insurance infrastructure such as mobile applications and remote sensing for crop loss monitoring. Agriculture insurance is expected to register flat growth in FY23 due to a sharp decline in premium rates in the Kharif cropping season, though this decline was more than offset by increased insured land area and farmer enrolments.

"In FY23 and FY24, the agriculture sector was affected by extreme weather events, lower reservoir levels, and damaged crops that adversely affected farm output and food prices. So, food inflation based on the Consumer Food Price Index (CFPI) increased from 3.8 per cent in FY22 to 6.6 per cent in FY23 and further to 7.5 per cent in FY24," the survey read.

The survey emphasized that in a growing economy, the share of agriculture declines over time, which aligns with Engel's law that suggests households, as their incomes rise, do not consume food proportionately more, thus reducing the share of food in their consumption expenditure.

The document detailed government efforts to facilitate farmers by subsidising water, electricity, and fertilisers. "The former two are provided virtually free. Their incomes are not taxed. The government offers them a minimum support price (MSP) for 23 selected commodities. Monthly cash support is offered to farmers through the PM-KISAN scheme. Indian governments - national and sub-national -write off their loans," the survey mentioned.

It further noted that earlier development models featured economies migrating from farm beginnings to industrialisation, and then to value-added services. However, technological advancements and geopolitics are challenging this conventional wisdom, prompting a "return to roots" model in farming practices and policymaking.

"Trade protectionism, resource-hoarding, excess capacity and dumping, on-shoring production and the advent of AI are narrowing the scope for countries to squeeze out growth from manufacturing and services," the survey read.

The survey suggested that resolving the issues in current policy configurations could turn these problem areas into strengths, potentially providing a model not just for India but for the rest of the world, both developing and developed.

"So, governments in India spend enough resources to look after the farmers well. Yet, a case can be made that they can be served better with some re-orientation of existing and new policies. The payoff will be immense if we untie the knots that bedevil farm sector policies. More than anything else, it will restore faith in the self-confidence and ability of the state to steer the nation to a better future, apart from delivering socio-economic benefits," the survey concluded.