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We would be looking at the present state of agriculture in the state of Kerala in India which was once regarded as the finest supplier of spices during ancient times. Kerala’s significance during the colonial era can be judged from the fact that the Dutch, Portuguese and the British competed against each other in getting a foothold in Kerala, thereby being in a position to control the global trade in spices.
However things have changed remarkably in the last decade. Even though Kerala’s profile has gone up in the recent past due to its remarkable strides in tourism resulting in it being called ‘Gods own country’, trouble has been brewing in paradise for some time now and the once prosperous state in now in the doldrums due to a debilitating agricultural crisis. As a result, there is a remarkable hesitation among banking institutions in Kerala in providing agricultural credit to farmers.
Is this because of the poor repayment capacity of the farmers? Is it due to agricultural failure? Is it because there is a new strategy among banking institutions to demote agriculture and promote industrialisation in Kerala?
Also we would be looking into the impact of Free Trade Agreements on the farmer and how hedging and futures & options are adversely affecting the farmers ability to get a remunerative price for his produce.
Exploration of Dilemma
Published Government records about the number of loans provided by banks to agricultural sector.
Reports published by banking institutions about the non-payment of agricultural credit and associated farmers’ suicide.
Price trends of various agricultural products during the last ten years
Government policies and Free Trade Agreements
Published data on forward trading in agricultural commodities
Is there an improper use of agricultural credit given to the farmers?
Is there increasing number of incidents of non-payment of loans?
Is it because any fear of banking institutions to provide loans to basically weak agricultural sector?
Is it because of any new strategy developed by banking institutions to promote industries only?
Is it because of absence of adequate Government assistance to agriculture?
Is it because lack of enough government rules and regulations on banking institutions.
Is it because of the fall in the prices of agricultural products in Kerala.
Is it because banks channelize their funds to other profitable opportunities.
Is it because of faulty policies of the Central Government
Is it because of future trading in agricultural commodities in stock exchanges
Is it because of Free Trade Policies entered into by India with other trade blocs?
Definition of Management Question
What should be done to increase the agricultural credit by banking institutions and the economic status of the agricultural sector in Kerala thereby achieving the ultimate objective of improving farm productivity and earning remunerative prices for the produce?
Exploration of Management Question
The exploration of information can be of qualitative and quantitative. Interviews will be conducted targeting qualitative information. Different types of primary and secondary data will be used for quantitative exploration.
Interview with managers of commercial banks.
Interview with managers of agricultural banks.
Interview with managers of agricultural co-operative banks.
Interview with presidents of agricultural co-operatives.
Interview with presidents of agricultural marketing co-operative societies.
Interview with farmers of different products who have taken agricultural credits and still straining to repay.
Interview with farmers who have taken agricultural credit and already repaid.
Interview with farmers union representatives.
Interview with Government authorities.
Interview with representatives of the public.
Interview with intermediaries in the credit system.
a. to farmers (100)
b. to bankers (100)
c. to agricultural co-operative societies (25)
d. to Government authorities (10)
e. to public (50)
Published research papers and study.
Magazines and news papers.
Re- defined research questions
Should the agricultural sector in Kerala be promoted?
Do farmers get enough financial assistance from banks?
Do the banks have enough resources to assist agricultural sector?
Should there be some education to farmers to repay loans?
Do banks need more assistance and regulations from Government in this area?
Does the government need to curtail forward trading in agricultural commodities?
Does the government need a re-think on the Free Trade Agreements signed with various regional and trade blocs?
How can the slide in farm productivity rates be arrested?
Kerala is a agriculture based economy. Most of the people depend on agriculture for their livelihood. Agricultural products do have a high sensitive price market in Kerala. The prices are tend to fluctuate during different seasons very widely. Most of the farmers do not get the benefit of price rise, if any, because, they might be shifted their agriculture to another product. Unfortunately, it usually happens in every season.
Farmers need assistance from financial institutions for financing their agricultural needs. Framers’ financial requirement is two fold, short term and long term. Short term assistance is meant for meeting the expenses for purchasing seeds, fertilizers wages etc. long term requirement is for the purchase of land, expansion of land, purchase of machineries etc.
The basic nature of farmers in Kerala is that they are not large scale producers. Most of them have only two -five acres of land and producing different kinds of agricultural products. Recent times there were a lot of issues like suicide of farmers due to the burden of debts. But in reality these debts were taken from private financial dealers by the farmers, who charges exorbitant rates of interest on their finance supplies.
Governments are accused of these phenomena. The real hand behind it should be found out. Here there is an attempt to pinpoint the real problems with the agricultural assistance and formulate methods and strategies to overcome the problems if any.
While reviewing the state of agriculture in the country, one is struck by the following situation. Kerala never had a so-called “green revolution”, as one did witness in states like Punjab, Haryana, Western Uttar Pradesh, Andhra etc. Why? The prime reason is the size of holding. Unlike in the afore-mentioned states, where holdings which may extend to hundreds of acres in private hands, Kerala continues to have, what is known as “homestead farming”- a combination of several annual, biennial or perennial crops, livestock, bee keeping, fish farming etc. Only in the plantation sector – tea, pepper, cardamom or coffee – does one see fairly large holdings. The Land Holdings Bill and The Tenancy Act of the fifties prevented large tracts of agricultural land passing into private hands.
Justification and Limitations of the Study
Many banking institutions in Kerala are not considering with enough importance, the application for financial assistance by farmers. This tendency is increasingly found in important commercial banks in Kerala. This study is an attempt to find out the need of providing financial assistance to agriculture and to find out the reasons for the hesitation on the part of financial institutions and the needed solutions. This study is limited to two districts of Kerala namely, Idukki and Ernakulam. In reality, these two districts are among the important aricultural producers in the state. Duration of the project is expected to be six months and the total cost estimated for the study is £250.
The purpose of this research is to discover the main causes of flowing the funds of financial institutions to areas other than agriculture in the state of Kerala. It will reveal
Possible causes of the problems
lack of regulations
methodology of implementation
Different methods and strategies to improve the agricultural sector.
The need for Government rules and regulations and the way in which it should be implemented
Benefits and Importance
More effort and money will be used for the development of agricultural sector by banking institutions and Government.
More infrastructural and mechanical facilities will be implemented for the assistance of the farmers.
It enhances the customer satisfaction and social status.
Government rules and regulations will be implemented for the development of agricultural sector.
Improve farm productivity rates
Remunerative prices for farm produce
Agriculture and economic development
Financial and banking systems
Deployment of recourses of financial institutions
Impact of Forward Trading on agricultural prices
Impact of Free Trade Agreements on Kerala’s agrarian economy
Baking System and Agriculture
Functionalistic Theories of
Edward Lee Thorndike
Clark Leonard Hull
Cognitive Theories of
Edward Chace Tolman
Neuropsychological theory of
Donald Olding Herb
Evolutionary Theory of
Bolles and Evolutionary Psychology
Types of Data
Primary and Secondary
The Kerala agricultural sector has now become very unproductive due to the absence of adequate financial requirements. Government is not concentrated on these issues with enough importance. Banking institutions show abstinence from giving the required assistance to the sector. By providing enough financial support, regulations and guidelines by the Government, we can make the sector more competent, productive and attractive.
Kerala has 66.57 lakh holdings (as per 2000-01 data) with an average size of holding of 0.22 hectares compared to 1.47 hectares at the national level.
Agricultural sector is closely linked with the livelihood security of 95% of the state’s population.
Kerala accounts for 1.56% of the net sown area and 1.61% of gross cropped area in India.
The value of output contributed by Kerala in respect of traded crops includes 92.50% of rubber, 85% of black pepper, 81% of cardamom, 55% of tapioca, 50% of the coconut, 33% of coffee, 17% of areacanut, 14% of cashew and 12% of dry ginger.
At the same time, Kerala’s share in export of the products of these crops was as high as 94% in rubber, 92% of pepper, 83% of spices oil, 74% of cardamom, 67% of cashew kernal, 63% of ginger, 22% of turmeric, 27% of curry powder and 16% of vanilla and 95% of cashew shell oil.
Kerala accounted for 2/3 (67.45%) share of the export of spices at the national level. Out of Rs.983 crores of foreign exchange earned in 2004-05 through the export of pepper, cardamom, ginger, turmeric, curry powder, spice oils and oleoresins, nutmeg and mace and vanilla, Kerala contributed as much as Rs. 663 crores which constituted 67.45% share. Hence, Kerala plays a very decisive role in India’s agricultural exports especially in the case of certain spices and plantation crops.
Since domestic and international markets are highly interdependent enhanced imports and exports under FTAs will have important implications on the domestic production, consumption, domestic product prices and levels of living of the farmers.
One unique feature of Kerala’s agricultural sector is the high degree of trade sensitivity. Approximately 80% of the gross cropped area is under plantation crops, spices and nut crops.
Tools Data Analysis
Method of Data Collection (Primary and Secondary)
Primary Qualitative data collection by personal interview with
1. Managers of commercial banks.
2. Managers of agricultural banks.
Managers of agricultural co-operative banks.
Presidents of agricultural co-operatives.
Presidents of agricultural marketing co-operative societies.
Farmers of different products who have taken agricultural credits and still straining to repay.
Farmers who have taken agricultural credit and already repaid.
8 Farmer’s union representatives.
9. Government authorities.
10. Representatives of the public.
11. Intermediaries in the credit system.
Primary Quantitative data collection using questionnaires
Questionnaires will be given to the following sections.
a. to farmers (100)
b. to bankers (100)
c. to agricultural co-operative societies (25)
d. to Government authorities (10)
e. to public (50)
Published research papers and study.
d. Magazines and news papers.
Kerala is an agrarian economy. Rubber, tea and coffee, pepper and cardamom, cashew, areca nut, nutmeg, ginger, cinnamon, cloves and the like, give the agriculture of Kerala a distinct flavour. It is coconuts which bring the people their principal source of earning in agriculture. Nearly 70% of Indian output of coconuts is provided by Kerala. Cashew is an important cash crop of the state. The state has facilities for converting raw cashew into the dried fruit, salted or plain. Cardamom is another cash crop which gives Kerala a distinctive place in Indian export. Alappuzha, one the district of Kerala known as the ‘rice bowl of the state’, has a predominant position in the production of rice (kuttanad Taluk). Tapioca is another important crop of the state, cultivated mainly in dry land. It is a food of Kerala state, next to rice.
Agricultural improvement is now a dominant theme in contemporary economical reform and development. There are a growing concern among politicians and wider public about agricultural sector. Before, there was a better kind of assistance to the sector by Government and banking institutions. But there is a tendency to focus on other issues rather than basic agricultural level. Any new attempts for the improvement of agricultural sector should take care of the following points.
The process should focus on enhancing the quality of assistance.
Loans should be provided to the farmers considerably reduced rates of interests.
Proper guidelines of the state Government are essential.
Government and financial institutions will seek to use data and enquiry in to drive forward the improvement efforts.
Consequent to the liberalisation of imports most of the agricultural commodities
of Kerala have been experiencing severe competition from products imported from outside. As a result the prices of commodities like coconut and copra, rubber, coffee, tea, arecanut, pepper and other spices have gone down even below the cost of production. The farmers of Kerala require income in making their products competitive in the international markets.
Profile of the sample households
* The households heavily relied on agriculture and allied activities for their survival.
* Fifty five percent of the sample households belonged to the category of households solely dependent on agricultural income.
* Seventy four percent of the heads of the households were farmers or farmer cum casual labourers.
* Of the total workers, 57 percent was engaged in agriculture and allied activities.
* Livestock rearing is an important subsidiary occupation of the farmers.
* Forty six percent were sub-marginal farmers having a size of holding less than 0.50 hectare.
* Twenty seven percent of the farmers have a size of holding between 0.50 and one hectare.
* Eighteen percent of the farmers were small farmers having a size of holding between one and two hectares.
Loans and indebtedness of farmers
* Ninety percent of the households had taken loans from various sources like commercial banks, co-operative banks, Kudumbasree, Private financial firms, money lenders, friends relatives and others, funds etc.
* The amount borrowed ranged from below Rs. 20,000 to 5 lakhs and above.
* Farmers borrowed money not only to meet cultivation expenses but also to meet other items of expenditure such as construction of a new house, major repair of house, marriage of family members, medical treatment, purchase of livestock, expenses for education of children, purchase of consumer durables, business etc.
* The repayment of loans availed from commercial and co-operative banks are poor and unsatisfactory.
* Majority of the borrowers had repaid the loan availed from Kudumbasree.
* Currently the farmers are taking more loans from non-banking financial agencies such as private financial firms, money lenders, funds, friends and relatives etc.
* Lack of clear land title (Pattayam) results in non-receipt of loans from commercial banks, co-operative banks and other financial institutions.
* Majority of loans are not repaid due to the expectation that the state government or Farmers Debt Relief Commission will accounce debt relief.
Production and productivity of crops
* The crop pattern is a mixed one.
* Major crops cultivated are pepper, coconut, cocoa, rubber, nutmeg, banana and other plantains, paddy, arecanut and coffee.
* The other important crops cultivated are ginger, cardamom, tapioca, cloves and vanila.
* More than 73 percent of the farmers were cultivating pepper, coconut and cocoa.
* Rapid shift of cultivation is taking place in favour of rubber.
* Rubber is not a suitable crop in the agro-climatic conditions of the district and the yield rate is low.
* The major cause of the agricultural crisis has been the fall in production and
* The productivity of all major crops such as pepper, coconut, cocoa, rubber, nutmeg registered a fall in recent years.
* Yield rate for pepper declined by 59 percent, coconut by 48 percent, cocoa by 37 percent, rubber by 25 percent, and nutmeg by 38 percent in recent years.
Causes for the fall in productivity
* Farmers reported a fall in rainfall compared to normal rainfall in recent years
* Lack of timely rainfall, failure of monsoons, fall in rainfall and drought conditions.
* Poor attention of crops, lack of manure and irrigation resulting in a fall in the yield rate.
* Spread of diseases and pest attacks on crops were major reasons for the fall in
* Forty percent of the farmers reported the spread of ‘Quick wilt’ in pepper crop.
* Twenty seven percent reported that spread of ‘Erythrina gall wasps’ in pepper
* Twenty eight percent reported spread of ‘Coconut mite’ in coconut trees.
* Forty three percent reported diseases in cocoa.
* Thirteen percent reported diseases in rubber.
* Failure of agricultural research to contain the diseases.
* Failure of government agencies to control the spread of diseases.
Fall in prices
* Farmers reported fall in prices of major crops during the last five years.
* The price of pepper fell by 55 percent.
* The price of cocoa fell by 27 percent.
* The price of cardamom fell by 50 percent.
* The price of coconut fell by 33 percent.
* The price of nutmeg fell by 42 percent.
* Absence of price stabilisation measures by the government agencies.
Cost incurred and value of agricultural products
* Due to small scale cultivation, one third (33 percent) of the farmers incurred an
expenditure in cash below Rs. 10,000 per year for cultivation.
* Another 20 percent incurred an expenditure in cash between Rs.10,000 and 20,000.
* The daily wage rate for male agricultural labourer per day was Rs. 141 and for female Rs. 90.
* Seventy nine percent of the farmers reported shortage of labourers.
* The annual value of agricultural output produced was very small (42 percent farmers had below Rs. 10,000, 12 percent Rs. 10,000 to 20,000 and 12 percent Rs. 20,000 to 30,000).
* The marginal farmers were getting only a very low earning from cultivation.
* An operational holding of more than two hectares is required to get a reasonable net income.
Agricultural system is central to any development in Kerala. So the development of agriculture will reflect the total existence and functioning of the nation. This is high time to admit the importance of this sector by Government and financial institutions. An organised implementation of a new strategy for the uplifting of farmers and agriculture may do something for the nation.
Kerala has been facing a severe agricultural crisis and majority of the
population are severely affected due to it. In this context the following strategy may be pursued to face the ‘acute crisis’
* Implement measures to solve the problems such as failure of monsoons, spread of diseases of crops, and fall in prices of agricultural commodities.
* Give relief and credit support to solve the financial problems of farmers.
* Help the farmers to earn income from non-farming activities like livestock, forestry, cottage industries, agroprocessing and tertiary sector activities.
* Accelerate the process of economic growth and strucutral change of the district through more public and private investment thereby generating more income and employment in non-agricultural sectors.
Credit Support to Farmers
* Long term loans at low rate of interest should be given to farmers for replanting
perennial crops, shifting cultivation to rubber and irrigational purposes by commercial banks, co-operative banks and other financial institutions.
* Short term loans at low rate of interest may be given to farmers for purchasing
livestock by financial institutions.
* New non-agricultural loan scheme may be started for the farmers to provide credit to construct houses, repair houses, marriage purpose, medical treatment, education of children, purchasing consumer durables etc.
* More loans for starting self-employment activities in non-agricultural sector to generate more non-farm rural employment for the youth and unemployed.
* The Commercial Banks, Co-operative Banks, NABARD etc. should give liberal credit support to Kudumbasrees to expand their activities and issue of credit to women.
Failure of Monsoons and drought
* Complete the execution of all ongoing major and minor irrigation projects in the
district without delay.
* Construct new check dams, minor irrigation projects and other micro irrigation projects suited to the irrigation of perennial crops cultivated in dry land.
* Renovate all existing ponds, water sources, canals, streams to promote irrigation.
* Financial support and loans to farmers to construct micro irrigation projects,
community irrigation projects, developing new water sources, constructing irrigational infrastructure, installation of pump sets etc.
* Strengthen the agricultural research of the Kerala Agricultural University and other agencies to find out solutions to contain the diseases of pepper, pepper standard, coconut, cocoa, rubber, coffee and arecanut.
* In the context of the failure of the state agencies, National Research Agencies may be requested to find out solutions to contain the diseases of crops.
* Expand the measures of the Department of Agriculture and other agencies to help the farmers through pest control measures, distribution of medicines etc.
Price Stabilisation Measures
* Ministry of Commerce, Government of India should start a price Monitoring cell to monitor price movements of the agricultural commodities such as pepper, cardamom, coffee, tea, coconut and rubber and take steps to stabilize the domestic prices. Appropriate policy instruments may be used to control the import of the commodities and stabilize the domestic prices to enable the farmers to get remunerative prices.
* The commodity Boards coming under the Central government such as Coffee Board, Spices Board, Rubber Board, Coconut Development Board etc. should resort to market intervention measures and procurement of agricultural commodities to stabilize the prices.
* In situation of steep fall in prices, the state government may also resort to market intervention by procuring the agricultural products such as pepper, cardamom, coconut, coffee, tea, etc. to maintain remunerative prices to the farmers.
Generate more non-agricultural employment
* Banks and financial institutions should provide liberal credit to the people to invest in non-agricultural activities.
* Start more Higher Secondary Schools in hilly district like Idukki.
* The Government agencies and social organizations should organise Vocational
Training Schemes to train young people to engage in non-agricultural activities such as small scale industries, agro-processing, trade, commerce, tourism, services etc.
* Promote migration of educated youth to other parts of India and abroad for jobs.
* Promote tourism development of the District through the implementation of tourist promotion schemes.
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