Issue No: 21
Moneta
So, by all these discussions,
I believe that if provisions are
removed by RBI for farmers loan
waivers, or if state governments
pay the dues by themselves, the
PSU banks won’t be affected by
that extent but we remain our
negative view for NBFCs and
extremely negative MFIs which
have already seen 20 per cent to
35 per cent correction in the
consensus earnings expectations
for FY18 in this calendar year.
July 2017
to protect farmers against both
production
and
price
risks.
Cooperatives
can
also
be
encouraged; these will help reduce
risk and transaction costs.
Central and state governments will
need to work together in order to
enhance the viability of the sector.
This will require investment in
practically every aspect of the farm
economy,
including
irrigation,
agricultural research, storage and
marketing. It will also require policy
decisions in other areas—foreign
direct investment in multi-brand
retail,
which
would
lay
the
groundwork for cold- chain storage
infrastructure—that
support
the
sector.
So what could be the solution for
this problem?
A paper brought out by NITI Aayog in
December 2015 made several
suggestions
that
are
worth
considering. Apart from efforts to
increase yields, the framework for
land leasing can be strengthened,
which
will
not
only
allow
consolidation, but will also give an
opportunity to unwilling farmers to
exit the sector. It also highlighted the
idea of price deficiency payment. If
the price of a crop falls below a
predetermined
threshold
level,
farmers can be compensated
through cash transfers. Adequate
safeguards need to be built in order
In the absence of this long-term
planning and vision, the stress in the
sector will keep resurfacing. And that
means the same protests, the same
debates and the same fiscally
deleterious government responses a
few years down the road.
- Rahul Jain
NMIMS, PGDM 2016-18
10