Why agricultural Term Loans are important in the present context
With the novel coronavirus slimming income generation opportunities for farmers, term loans seem to be the easiest path for gaining capital funds.
According to PRS Legislative Research, the agriculture sector’s contribution to India’s GDP has decreased from more than 50% in the 1950s to around 16%-17% now. There exist many reasons behind the cause of such decline, but one that sticks out like a sore thumb is the lack of monetary support.
The COVID-19 pandemic has forced agricultural supply chains to succumb to a rapid fall, further disrupting the livelihood of 70% of India’s rural households that depend primarily on agriculture. To upscale this landscape, funding for increased quality production and modern machinery use for value addition is necessary.
As opposed to other agricultural loans that only offer an 18 months repayment limit, long term loans allow farmers more time- 15 years; while also acting as a catalyst in their capital funds. Keeping in mind how the pandemic has put the world on hold, a more extended repayment period serves as a ray of hope for farmers barely getting by. Long-term loans will help them increase the credit flow and improve their livelihood by paving the way for dairy farming, irrigation, horticulture, animal husbandry, inland fisheries, etc.
Following are a few more ways in which term loans have become the need for the hour:
- Funds for farming equipment
In today’s fast-paced world, the agricultural supply chain has failed to keep up in terms of efficacy. With the quality, speed and value of production not favouring India’s farming sector, a boost in farm mechanization can lead to an unprecedented boom. This will change the track from a low-quality agriculture process to much more modern and efficient farming, generating greater cash flow and productivity.
- Purchasing lands
As long-term loans bring in capital, it allows farmers to purchase lands further used for cultivation. Owning a land brings long-term benefits for the farmers and provides crop cultivation to supplement the country’s exceeding demand in present times. The government needs more cultivable land under its wing to be a progressive nation.
- Aid in Horticultural Activities
An influx of capital funds via long-term loans will help farmers pay attention to the quality of their horticultural activities. They can adopt good pest programs instead of using toxic chemicals to save costs, allocate funds for drip irrigation systems as per the crops and even chalk out a profitable land water management process.
- Provide Larger Scope for Dairy and Poultry Industry
As our country still stands to have the largest livestock population, long-term loans help explore dairy and poultry farming. Purchase of sheds, milch animals, and equipment is made possible, allowing farmers to expand their income sources and increase the countries’ overall agricultural contribution.
- Assists in Fish Farming
Today, fish farming is said to be the fastest-growing sector in terms of food production. The long-term loan credit flow can cover the cost of operation, formulation, and financing. When the farmers have not availed any investments but needs working capital, long term loans again act as a saving grace. Since the demand for fish in India is rising, aquaculture is what the farmers and country need to step into now.
Hence, Agricultural Term Loans can help farmers with the current lack of funds enabling them to market their crops while exploring other agricultural sectors. This in turn is bound to boost agriculture’s contribution to the country’s GDP.
Author: Team Nafa
