All India Rural Financial Inclusion Survey -Explained
- GS Mains- Paper-3
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 –
- A household receiving value of produce, more than Rs.3000/- from agriculture
- 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:-
- 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.