Speaking within days of a farmer committing suicide at a public rally in Delhi, Rajan said one should neither take it “lightly” nor offer easy explanation as these are “complicated matters”.
He also said that lack of formal financing is bigger problem than excessive burden of informal financing.
“The need of the hour is to expand formal institutions to every corner of country. In the last few days, we have seen the tragic picture of farmer suicides…(these) are complicated matters. There is no easy explanation to why somebody takes ultimate step.
“One should neither take it lightly nor offer too easy an explanation. It needs to be studied,” Rajan said here today while addressing a function.
Following the suicide by Gajendra Singh, a farmer from Rajasthan, in full public view in Delhi, the issue of farmers ending their lives has come to the centrestage.
The incident also rocked Parliament and Prime Minister Narendra Modi had appealed for a collective solution to the “deep-rooted” agrarian crisis.
“…it is lack of formal financing rather than the excessive burden of informal financing which is the problem. So can we move formal financing to every area of the country,” he said, adding that Pradhan Mantri Jan-Dhan Yojana was one of the initiatives aimed at providing finance to needy ones.
The RBI Governor Raghuram Rajan further laid emphasis on providing formal finance to small and marginal farmers who really do not have access to it.
“We need to look at whether we have right institutions. Whether we have right incentive in the system,” he further said.
On prevalence of Arthiya system in the farm economy, Rajan said the loans given by commission agents could be at very high rates to farmers.
Referring to debt-waiver scheme, he said the loan waiver schemes launched for growers actually “impeded” the credit growth in the system and disrupted the credit culture.
“…in some states where loan waiver takes place, it actually impedes the growth of credit rather than enhancing …it disrupted the lending rather than increasing lending going forward,” he further said.
Asserting that one should “avoid taking simplistic answers” to farm problems, Rajan said the focus should be on raising farm yields, promoting agriculture allied sector and provide opportunities to growers.
There is a need to increase productivity of the agriculture sector, create other opportunities in allied activities like dairy and animal husbandry, Rajan said.
Besides, an emphasis should be laid on “increasing opportunities outside the agriculture sector so people can go part time in other jobs to supplement their income even as agriculture is not so remunerative,” he said.
The RBI Governor further said that steps need to be taken with regard to protecting the farm sector from the impact of climate change.
“It (agriculture) is subject to increasing risks (like) climate change…we also need to understand how to protect agriculture better against these kinds of events,” he further said.
Referring to ‘Make in India’ initiative, Rajan said it could be an answer to increase opportunities in and around the agriculture.
Stressing on attaining sustainable growth, Rajan said that national security could not be achieved unless there is an economic security.
“Macro stability is a key in a world which is unstable. We need to preserve buffers, create stability…but it is extremely important both for economic security and national security.
“We cannot have national security unless we have economic security and for economic security, we need good economic management across the board. Growth is essential part of it but that growth has to be sustainable. As we have sustainable growth, we will expand at high rates in years to come,” he said.
Major steps were being taken on economic front in terms of fiscal consolidation, Goods and Services Tax (GST) and transfer of direct subsidies to beneficiaries, Rajan added.
“These are extremely important steps to ensure (that) we have viable fiscal aspect to a macro economics,” he said, adding the inflation needed to be under control while credit growth should be of high quality for achieving sustainable growth.
“On monetary stability, we have to make sure that inflation is under control. There is a trust with value of the rupee internally and externally, credit growth is of high quality,” he said.
Rajan further said besides targeting exports, efforts should also be taken on carefully managing domestic demand to fast pace growth.
“How we can fast pace our growth. Even though we want to export to rest of the world, we have to recognise that our own domestic demand is managed carefully. Clearly, we have to increase quality and quantity of manufacturing,” he said.
He also stressed on improving infrastructure, changing business environment, providing entrepreneur-friendly atmosphere and creating more job potentials.
“We have to reform the financial sector to make it much tolerant to risks,” he said.
On Make in India, he said, “We have to make sure that there is enough demand. Certainly world is growing slowly. Year after year it is not picking up. We have to focus on making industry competitive with rest of world and we have to carefully manage our domestic demand.”