All India Rural Financial Inclusion Survey -Explained

 

Relevancy

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  • Economy

Why in news?

  • Recently NABARD released the results of the All India Rural Financial Inclusion Survey.

What does the survey say?

  • The survey that was for the year 2016-17 covered 40,327 rural households.
  • Agricultural households were defined as those where at least one member was self-employed in agriculture in the past year, and which derived at least Rs 5,000 from agricultural produce.
  • It found that the average annual income of an agricultural household was Rs 107,172 versus Rs 87,228 for non-agricultural households.
  • Only about 48% of all rural households are agricultural and only 23% of rural income comes from agriculture.
  • This reveals that rural India is no longer predominantly agricultural.
  • 88% of agricultural households diversified their sources of income.
  • The most important among them was wage labour, including public works, which accounted for more than a third of the income of agricultural households.
  • It provides an important source of supplementary income to farmers, especially when they consider cultivation as risky and unremunerative.
  • The income of agricultural households possessing less than 0.4 hectares (one acre) is lower than both those who have more land, and those who have no land.
  • These households might well be better off if they were to either sell off their land, or if they were to buy or lease in more land.
  • This illustrates the importance of well-functioning land markets.
  • It also highlights the need to liberalise tenancy laws, so as to enable the recording of leasing for the purposes of inputs, credit, insurance and marketing support.
  • 88% of the rural households reported having a bank account.
  • Yet, savings in a formal institution is meagre and this shows the dormant status of the savings account opened under Jan Dhan Yojana.
  • Any household which had an outstanding loan at the time of the survey is dubbed “indebted” and found that found that 47% of all rural households were “indebted”.
  • The borrowing households had borrowed about Rs 92,000 on an average from all sources, 70% from formal and 30% from informal.
  • Only 6.9% of the households that had an agricultural loan had crop insurance in the agricultural year 2015-16.
  • But the coverage of farmers raised to more than 50% in the year 2016-17 under the Pradhan Mantri Fasal Bima Yojana.

How can it be made better?

  • The survey differs from NSSO surveys slightly in its definitions of basic concepts such as “rural” and “agricultural household”.
  • If these definitions had been the same, the figures produced by this survey could be more easily compared with the figures produced by the NSSO.
  • The term “indebtedness” conveys a negative image, notwithstanding the fact that state policy in India has been aimed at increasing formal indebtedness.
  • The term “indebted” should be used for those households whose liabilities exceed their assets or whose debt servicing obligations exceed 30% of their income, instead of taking mere outstanding loans as a criterion.
  • Access to credit helps increase the net earnings for some households, while others might find themselves in a debt trap, compelled to borrow more to repay previous loans.
  • Hence, the survey should attempt to distinguish between these two kinds of households so that it will be useful from a policy perspective.
  • Also, the survey might be better if it were shorter and the questions be spread across more households.

Classifications as per NSSO:-

  • ‘Situation Assessment Survey of Agricultural Households’ conducted in NSS 70th round considers an agricultural household as –
  1. A household receiving value of produce, more than Rs.3000/- from agriculture
  2. At least one member self-employed in agriculture either in the principal status or in subsidiary status during last 365 days.
  • ‘Situation Assessment Survey of Farmers’ conducted in NSS 59th Round considers:-
  1. A ‘farmer’ as a person who possesses some land and is engaged in some agricultural activities on that land during last 365 days preceding the date of survey.
  • Thus the definition followed in NSS 59th Round had kept all agricultural activities of persons outside the scope of the survey which did not possess and operate any land.