Credit is easing in agriculture and allied sectors

India’s agriculture and allied sector is the only silver lining, which is still exhibiting growth, in a Covid-hit economy and has the scope of spawning several micro, small and medium enterprises (MSMEs) that can create several much-needed jobs in the country.

At a discussion that featured as a part of Sashakt India: Powering the MSME Engine, a platform for exchanging ideas for the development of the MSME sector, organised by Network 18 and Bandhan Bank, two industry leaders who know rural India well, Chandrashekhar Ghosh, MD and CEO, Bandhan Bank, and R.S. Sodhi, MD, GCMMF (Amul), discussed at length the opportunities for growth in India’s agriculture and allied sector.

Opportunities in the dairy sector

According to Sodhi, India’s the dairy industry in India, including the food processing component, was pegged at Rs 8 lakh crore and growing at 9-10% annually. This opened the scope for a number of MSMEs to come in and partake in the development of the dairy sector across the value chain – right from milk production to providing proper feed for cows, veterinary services, milk chilling, storage and transportation. Sodhi pointed out that out only a small portion of the dairy sector was organised and one could become a milk entrepreneur by making a minimum investment of ₹20 lakh over a three-year period, needed for starting a small dairy farm of 25-30 cattle. Banks would be willing to finance proposals for such a business since they know that the milk thus produced will be sold to local cooperatives, he said.

Augmenting agri infrastructure

Ghosh was of the view that significant improvements need to be made to agri-infrastructure in the country and this would present opportunities for enterprises as well. He cited the example of West Bengal where agricultural production far outstrips the capacity to store agricultural produce. Unless new storage facilities come up and better roads and transportation infrastructure is established, farmers would not be able to realise the best price for their crop, Ghosh said.

Collaterals and rural credit

According to Ghosh, 50 percent of rural India is eligible for cash flow-based micro credit. These are collateral free loans, and Bandhan Bank has been a pioneer in making such loans available to those who need it at the base of the economic pyramid. Ghosh, a pioneer in the field of microcredit and inclusive banking, was of the opinion that multiple banks are required to cater to the vast need for such credit services. Not only has Bandhan Bank provided those often ignored by the formal financial system access to timely credit, it has also fostered a culture of savings through deposits, which has led to financial independence for many low-income households.

The session was moderated by CNBC-TV18’s Executive Editor Latha Venkatesh.