It is a welcome step that the Centre has approved an interest subvention of 1.5% on short-term agriculture loans of up to Rs 3 lakh for all financial institutions because it not only will increase the lending capacity of the banks despite the steep increase in the repo rates by the Reserve Bank of India but will also ensure adequate cash flow in the agriculture sector, saving it from cash starvation as several other sectors already are. At the same time, ensuring that the farmers get the loans at the same, constant 7% interest rate, which then comes down to just 4% on the timely payment of the loan by the farmers, the Union Cabinet has saved the farm sector from great losses.
The approval of the interest subvention, which has been widely welcomed and termed a key decision in ensuring that the farm sector doesn’t feel the heat of the inflation coupled with the repo rate, will require the Government to have an additional budgetary provision of Rs 34,856 crore which is quite huge and should be seen as how serious the Government is in ensuring that the farmers get least affected by the prevailing economic conditions at home which are directly getting affected due to global economics where several countries are facing recession coupled with the outcomes of the on-going Russia-Ukraine war which has aggravated the situation further. Amid such a situation, the interest subvention for the farmers needs to be appreciated and welcomed.
At the same time, there are other sectors too that cannot be side-lined and for which the Government needs to think seriously—taking the example of the small and medium businesses (SMEs) in India which even though, doing well, needs similar assistance and the same approach from the Government. Amid the rising repo rate, the growth of the sector is facing stagnation because the banks are holding more and more money, which has made the situation a bit tricky and miserable for those who are in the SME sector. At the same time, they are not getting the loans at lower interest rates as the farmers do which makes it all more complicated.
No doubt that the agriculture sector is the key sector of the country’s economy, but at the same time SMEs in India, if the Confederation of Indian Industry (CII) is to be believed, include over 63 million units and accounts for nearly 30% of India’s GDP—these number project the importance and the spread of the sector along with its depth, making it necessary for the Government to have a similar approach towards it; there is a need for providing relief to both the sectors because both the sectors have suffered more since the outbreak of the pandemic and after that followed the drastic changes in the global economics. There is a hope that the Government would go ahead with similar interest subvention for the SMEs for its greater good—it might help the sector gather itself for a new start, who knows?
