A serious exercise by Nabard to reposition itself in refinancing agricultural and rural lending, and giving private agricultural capital formation a much needed boost went almost unnoticed. It got only a quarter column mention in the inside pages of some financial papers. Private agricultural capital formation as a percentage of agricultural GDP, according to the new series of CSO estimates, shows an increase to 17.55% in 2008-09, a healthy growth. In comparison, prices fell from 12.41% in 2005-06 to 11.58% in 2006-07. But, whichever way we look at it, shoring up private investment in agriculture is a priority. U Sarangi, chairman of Nabard, stated that in less developed areas, where agriculture has been growing, investment is not showing the necessary revival.

The greats in our financial sector have been men with alternate visions. Beginning with Dada Saheb Karve, DR Gadgil, S Talwar and RN Malhotra, and later people like PD Ojha, NA Mazumdar and Venugopal Reddy, have shown great sensitivity to agricultural and rural finance and, as far as bankers go, the need for unorthodox approaches. The system has been built with some care and can take in its stride attacks from ?reformers? (follow the Basel Convention even if it violates the agricultural crop cycle in India) or worse, loan melas. Sarangi, belonging as he does to the higher civil services, is rooted in tradition, with his heart in agriculture. In the late 1980s, Rajiv Gandhi was giving me the education of a lifetime, many years after my American econometrics degree, by pushing me to build the first agro-climatic plan, which involved going to each of the 18 regions. In Nashik, the drought-prone region wasting water on sugarcane, a young collector took the lessons from scientists to heart. He built, for the Sahyadris, a watershed development programme and followed it up with a horticulture and tree crop plan. He thought through the tree cycle, the seeds, the collateral for the tree cycle loans, ridge sowing and the markets. In those days, there was not much else apart from cane and jowar. Fights over water had begun. Now one can buy fruit from the roads, see drips servicing tree crops and prosperity, to counterbalance the suicide belt in Vidharba and Naxals in Chandrapur and Gadchiroli. That young collector was Sarangi.

In 1990, Nabard was asked to write its annual report on financing agro-climatic plans, but the VP Singh and Narasimha Rao governments were out to scuttle anything Rajiv Gandhi thought of and the entire system was dismantled. Later, a GK Chaddha committee was to try and salvage it, by which time it was too late. The 11th Plan is in the same mould and its blue ribbon agricultural schemes say that funding will come only if the balance resources needed are worked out and priorities are set in the local agro-climatic paradigm. We are told that a rudimentary district agricultural plan exists for each district. But an IRMA State of Panchayats Report for 2008-09 did not find any district in the know of such a plan. So there maybe some disconnect in remedying the problem.

Nabard?s new thinking is state of the art in the rural development game. It sees its role in developing refinancing for financial products to suit each region?s agricultural priorities, leaving the state funding to the Plan. This idea is fascinating and has the potential to go far. The difficulty, when a farmer or a group of farmers (producer companies or co-ops) get together to implement new profit making ideas emerging from the demands of a fast growing economy, is that the funds are generally not available from the largely public-sector banking system. Very few private and no foreign banks, apart from the Dutch co-op Rabo, go where no man has gone before. Some states have worked it out, but they?re an exception. For example, Maharashtra has an easy scheme to finance watershed development, ridge furrows, seeds for tree crops, even expensive ones like Bt, drips and for the tree growing cycle for horticulture. There are many new needs for funding such as fodder crops, money for innovative water management, combinations of farm ponds and drips, piped delivery systems, certifying organics and meeting the preliminary costs of leaching the soil of accumulated muck and so on. The usual examples are to the contrary. In many states, producer groups, incorporated in the Companies Act, do not get working capital since the rules pertain only to co-ops. Government departments get money, company and co-ops get money, but new organisations get only compliments, no cash. If Nabard breaks that cycle, it will have reinvented itself for 2020.

The author is a former Union minister