News Excerpt:

The National Bank for Agriculture and Rural Development (NABARD) has announced that it will launch a ₹1,000-crore fund to support technology-driven agri-startups and rural enterprises.

More about the fund:

• The fund will support startups facing challenges in scaling up their operations due to limited access to equity and debt instruments.
• It seeks to cultivate new connections within the rural ecosystem, fostering both forward and backward linkages.

Need of the fund:

• Despite the government's efforts through initiatives like the agri-infra fund scheme, animal husbandry infrastructure development fund, and food processing fund, the credit from these funds primarily benefit traditional farmers and established players.
• Nearly 8% of NABARD's balance sheet is currently allocated to production credit.
• There is a need to redirect this allocation towards more investment credit to fund startups who are coming up with new technologies.

Other schemes and programmes for agri-startups:

• In the budget for FY23 the Finance Minister announced the plans for a blended capital fund, to be raised through co-investments, and facilitated by NABARD. 
• The fund was to finance startups for agriculture and rural enterprise, relevant for the farm produce value chain.
• The agriculture ministry has also been executing the 'Innovation and Agri-Entrepreneurship Development' programme under the Rashtriya Krishi Vikas Yojana since 2018-19. 
• It aims to foster innovation and agri-entrepreneurship by offering financial and technical assistance to nurture the startup ecosystem in India.

Regional disparity in allocation of funds:

• Southern India has better infrastructure and credit culture compared to eastern and central India. 
• Because it is a systemic issue, credit distribution favours southern regions.
• For FY22, 48% of the agricultural credit disbursed, amounting to ₹21 trillion, was directed to five southern states – Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Kerala.
• Despite this substantial allocation, these states collectively only accounted for 17% of India's gross cropped area.
• In contrast, the northern states of Rajasthan, Punjab, Haryana, Jammu & Kashmir, and Himachal Pradesh, which represent 20% of the gross cropped area, received around 17% of the total credit flow, amounting to ₹3.38 trillion.

Data about agricultural credit:

• In the first three quarters of FY24, agricultural credit disbursed amounted to ₹16.37 trillion.
• FY23 witnessed agricultural credit disbursements surpassing the target of ₹18.5 trillion, reaching ₹21.55 trillion.
• Commercial banks held the largest share of agricultural credit disbursed in 2022-23, accounting for 72% of the total.
• Cooperative banks followed with a share of 13%, while regional rural banks accounted for 15% of the total credit disbursed.