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World Bank Loan to Give Indian Farmers Access to Cheap Credit

  • Anjana Pasricha

The World Bank has approved a $600-million loan for farmers in India to help fight rural poverty. Concern is growing over slow growth in the farm sector, which supports nearly two-thirds of the country's population, as Anjana Pasricha reports from New Delhi.

The World Bank says the $600 million will be used to revamp rural cooperative banks so that they help poor farmers seeking loans on affordable terms.

The World Bank says more than 70 percent of small farmers have no access to credit from a financial institution, and many are often forced to rely on "extortionate money lenders".

In a statement, the Bank has expressed hope that easier access to loans will help farmers break out of the clutches of moneylenders, increase incomes and improve livelihoods.

Farmers' advocates say that in recent years, crippling debt has driven thousands of farmers in western and southern India to commit suicide. The worst hit states are Andhra Pradesh, Karnataka, Kerala and Maharashtra.

Sharad Joshi heads a farmers' organization called the Shektari Sanghathana, which works in these states.

"Practically all the suicides are land-owning farmers," said Joshi. "They all have loans, and they were all in a position not to be able repay the loans, and there were other social problems like a daughter's marriage which is pending, or the son's education, or some illness in the family."

Farm experts have urged the government to extend loans to farmers at rates of four percent instead of the seven percent currently charged. They say cheaper credit will help farmers adopt better technology, and to buy better quality seeds and fertilizers.

But farm leader Joshi stresses that cheaper credit will not alone end rural poverty. He says the government must ensure that farmers get better prices for their crops, so that farming becomes a profitable business.

"If agriculture is a paying proposition in India, then I can imagine bankers standing in a queue in front of farmers' houses to extend them loans," he said. "They do not do it today because they know agriculture is a losing proposition."

The government says it is concerned about falling farm production and is planning to boost agriculture output by 11 percent over the next four years.

Experts say poverty is deepening in rural India as growth in the farm sector slipped from five percent in the 1980s, to two percent in recent years. In contrast, the overall economy is racing ahead with growth at more than nine percent.

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