Input Delivery System in Agriculture including Irrigation and Other Services and their Efficiency: The Role of Finance Sector

The character of farming in India is changing. There is a shift towards high value agriculture given the economic pressures and the lure of big gains. Along with capital, the extent of knowledge inputs required in farming to make the farming system robust and resilient is increasing. This is particularly important when we consider the fact that the biggest transformation is happening in the semi-arid and arid regions that are water-scarce and also subjected to high climatic variability and extreme weather conditions. The paper discusses the drivers of future agricultural growth in India, and the key features of the emerging farming systems; the technologies that act as drivers of change in agricultural output, and are capable of improving the input use efficiency and reducing the production related risks to sustain this growth, and their cost implications; the institutional approaches that can reduce the market risks associated with the emerging farming system; and finally the role of financial sector in boosting technology adoption and reducing market risks in farming. The following are the interventions to make the recently witnessed growth in the agricultural sector sustainable and socially viable: (i) assessing the weather induced and other production risks, and market risks in farming, prior to advancing farm loans; (ii) linking farm loans to crop insurance; (iii) design insurance products based on risk assessment; (iv) undertake research on resilient farming systems; (v) link subsidies to efficient use of technologies and resource, especially water and energy; and, (vi) offering special incentives for promotion of farming clusters.