Capital formation in Telangana State agri sector weakening

In Telangana, the contribution of primary sector including agriculture, horticulture and animal husbandry to the Gross State Domestic Product (GSDP) for 2016-17 is only 15.3 per cent. Despite, this as much as 55 per cent of working population is still dependent on agriculture which is mostly dependent on rainfall in Telangana.

A perusal of the long-term agricultural scenario in Telangana calls for attention to the decline in state support for capital formation, fragmentation of land holdings and high incidence of rural indebtedness. Capital formation is crucial in agriculture as increasing production and productivity is paramount to keep pace with the needs of a growing population. It also has implications for a majority of small and marginal farmers engaged in agriculture against all odds, especially vagaries of monsoon.

According to National Bank for Agriculture and Rural Development (Nabard) data, there has been a decline in capital formation for agriculture through public investment. During 2011-12 and 2014-15, the long-term credit, which is used for investment in agriculture and is seen as an indicator for its health, declined from Rs 11,112 crore to Rs 8,856 crore. "It is a concern that the share of long-term credit in overall agriculture credit is constantly on the fall,’’ Nabard said in its State Focus Paper 2016-17 for Telangana.

Investment in agriculture is generally undertaken for acquiring physical assets that result in creation of a stream of incremental income over a period of time. Capital formation through investment in agriculture helps in improving the stock of equipment, tools and productivity of resources employed, which, in turn, enables the farmers to use their resources, particularly land and labour, more productively. Currently, private sector constitutes almost 85 per cent of the capital formation in agriculture.

The period 2011-12 to 2014-15 also coincided with the interest subvention period for crop loans which might have acted as a distorting factor, the apex bank for farm sector said, adding that creation of capital goods is necessary to raise productivity of existing resources. The average size of holdings in the state is lower than that of the all-India level at 1.16 ha and the position is more ‘distressing’ in respect of small and marginal farmers as their average size of land holding is 1.12 ha.

The ongoing major and minor irrigation schemes need to be quickly completed in a limited time frame with intensive monitoring. “There is also a substantial gap between the potential created and utilized,’’ the bank said. Even the 70th Round of the National Sample Survey (NSS) on “All India Debt and Investment Survey” report confirms that Telangana is among States with a high incidence of rural indebtedness with 89 per cent of agricultural households under debt.

More than half the agriculture households in Telangana are in debt, and the worst affected states are southern states like Andhra Pradesh, Telangana, and Tamil Nadu, says the 70th round of NSSO survey. The survey says about 52 per cent of agricultural households in the country are estimated to be in debt. Among the major states, Andhra Pradesh had the highest share of indebted agricultural households in the country (92.9 per cent), followed by Telangana (89.1 per cent) and Tamil Nadu (82.5 per cent).

The report states nearly 40 per cent of households take loan from non- institutional sources like money lenders. The survey also showed that a very small segment of agricultural households utilised crop insurance because of lack of awareness. The report reveals that the average value of the asset for cultivator and non-cultivator in Telangana is Rs 13.9 lakh and Rs. 3.8 lakh respectively while at all-India level it is Rs 28.7 lakh and Rs 6.7 lakh respectively.

The average asset value for rural households of Telangana is Rs 6.38 lakh and that of urban Telangana is Rs 18.45 lakh, which is 2.9 times higher indicating high inequality between rural and urban population in the State. The survey also points out that the Incidence of Indebtedness (IOI) among the rural households in Telangana is twice the IOI of rural All-India. Around 59% of rural households are indebted in Telangana State as against 31% at all-India level.

Moreover, indebtedness is higher among the cultivators as compared to other occupational category; about 74% of cultivators in Telangana are indebted. While the debt-asset ratio among the rural and urban areas of Telangana is around 6.1 % and 10.3 % respectively, in case of India it is as low as 2.5% and 3.8 % respectively.

By Gudipati Rajendera Kumar