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Time to wake up
Needs decisive actions to achieve higher growth rate

Karnataka has been suffering for some time on account of severe drought conditions prevailing in 140 taluks out of 176 taluks. As a result, farm production has come down by 4.7 per cent. Farmers growing cash crops have suffered extensively. Sugarcane growers are facing the problem of fall in income due to rise in input costs. Lower sugarcane price has led to increase in sugar production leading to a glut in the market. Sugar factories have not paid the ‘state-administered price’ of sugarcane supplied to them. The state government has now sought the Centre’s assistance to pay dues of Rs 2120 crore owed to farmers by sugar factories for 2014-15.

The rate of growth of gross domestic product of the state during the year 2015-16 has declined to 6.2 per cent from 7.8 per cent during the previous year, on account of poor performance on the agricultural front. The manufacturing sector, however, recorded an increase in its growth from 12 per cent to 15 per cent. The tertiary sector has also made an improvement in its contribution to the state’s economy from 59 per cent to 64 per cent.

Farmers’ suicides

One of the tragic events of concern is the growing number of farmers committing suicides. From April 2015 to January 2016, the number of farmers’ suicides reported in the state at 1002 is the highest in recent years. During the last few years, these figures were much lower, growing from 146 in 2010, to 242 in 2011 and started falling to 58 in 2014. The irony of death tolls is that Mandya district, the rice bowl of the state, has witnessed the largest number.

According to an expert opinion, an increase in the number of suicides may partly be attributed to the announcement of the rise in  compensation payable to the bereaved families, from one lakh rupees to two lakh rupees.  It is not easy to accept the probability of the higher amount of compensation working as an ‘incentive’ for a debt-ridden farmer to take the extreme step. Incidentally, there is a saying in Kannada, which almost endorses such a situation; the sight of money wakes up even a dead body. And in Kannada literature, there is a negligible difference in the spellings of money and dead body. Money is Hana and dead body is Hena.


Increasing institutional farm credit:


Without being insensitive to the calamities faced by the farming community, it is necessary to devise programmes to assist them to come out of the tragic situation. One of the biggest problems of farmers is the massive increase in their indebtedness, borrowing heavily from moneylenders at exorbitant interest rates in addition to the bank loans. Despite all efforts made to reach out to them and extending credit at lower interest rates, farmers’ dependence on non-institutional lenders, particularly moneylenders, continues unabated.

In the state Budget of 2016-17, a proposal is made to extend farm credit at zero rate of interest up to Rs 3 lakh per account. Secondly, farm loans up to Rs 10 lakh would be lent at 3 per cent. An amount of Rs 11,000 crore would be loaned to 23 lakh farmers for  the installation of solar pump sets. Though the modalities of these lending programmes are not specified in the budget, banks would be assigned the responsibility of implementing them.

For enhancing farmers’ welfare, there is a proposal in the state budget for the constitution of “Karnataka State Agricultural and Farmers Welfare Committee” under the chairmanship of the Chief Minister. Redressing farmers’ grievances and achieving better co-ordination at district, taluk and hobli levels would be the concern of this high-level committee.

Banks’ efforts in reaching out

The banking sector in the state has played its role diligently in reaching out to the hitherto unreached. The state has the unique distinction of having five public sector banks and one private sector bank originating in the state. They have maintained strong roots in almost all the districts since long.

As far as the spread of banking into rural areas is concerned, the progress made so far is remarkable. According to the roadmap prepared for the rural spread, out of the 1000 villages in the state having a population of above 5000, already 790 villages are having brick and mortar branches of commercial banks including the gramin banks. In the remaining 210 villages, banks are expected to open branches 31 March 2017.  

The number of unbanked villages identified in the state is 3395. By extending the service points, including the branchless banking model, banks have covered all these villages by March 2015, according to an official announcement. Banks are considered to have achieved cent per cent coverage of the unbanked villages in the state as a result.

The banking sector has 3327 rural branches, mobilising deposits to the extent of Rs 483,103 crore as on March 2015. The volume of credit lent by these branches was Rs.472,308 crore. The credit-deposit ratio works out to be as high as 97.92 per cent. For the banking sector as a whole, the credit-deposit ratio is not greater than 76 per cent. Besides commercial banks, three state-based grameen banks, viz., Karnataka Vikas Grameena Bank, Pragathi Krishna Grameena Bank and Kaveri Grameena Bank, also have played an active role in rural credit disbursal. Their records of performance are quite impressive among all the 56 grameena banks operating in the country.


Farm credit


Farm credit extended by banks in the state is Rs. 97,987 crore, constituting 20 per cent of total credit, as against the stipulated target of 18 per cent. Advances extended to the weaker sections amounted to Rs 67,194 crore, accounting for 14 per cent of the total advances. The priority sector advances stood at Rs  202,011 crore, constituting 41 per cent of total credit.

According to the Annual Credit Plan 2015-16 of the banking sector, as against the annual target of Rs 112,460 crore to be lent to the priority sectors, banks have disbursed Rs 97,439 crore by the quarter ended December 2015. The achievement level of 86 per cent under priority sector credit is reasonably good.  Banks in the state have achieved 93 per cent of the target stipulated under agriculture and allied sector, 149 per cent under MSE against their goals.  


Spurt in stressed assets

The banking industry as a whole is facing the problem of growing volume of stressed assets adversely affecting their profitability. During the third quarter of FY2016, the gross non-performing asset ratios have increased sharply, resulting in more than six banks incurring losses in their balance sheets. Though relevant figures of NPA ratios for the banking sector in the state are not available, it is most probable that the situation in the state may not be different from that of the whole country.

One of the contributing sources for the growing concern of bankers is the likely impact of the stressed assets relating to Kingfisher Airlines Ltd. The consortium of 17 banks is helplessly knocking at the doors of Debt Recovery Tribunal in Bengaluru for recovering the outstanding amount of Rs 7000 crore. Three of the Karnataka-based public sector banks have a sizeable share of the overdue amount.

Attracting global investors

Karnataka, like many other states, has been inviting foreign investors annually for the Global Investors Meet held in Bengaluru, India’s Silicon City. Invest Karnataka 2016 took place in February this year. The Government of Karnataka had a list of seven partner nations-- France, Germany, UK, Italy, Sweden, Japan and South Korea for this event. The new Industrial Development Policy of the government has envisaged 12 per cent industrial growth, investment of Rs. 5 lakh crore and generation of 15 lakh jobs. The prospective investors were assured that by June-July 2016, Karnataka will become a power surplus state and there should not be any power problem for industries.

In the pattern of electricity generation in the state, greater reliance is on hydroelectricity. With monsoon playing truant, hydro-electricity generation is likely to be severely affected. Investing more on thermal power, it is expected that June-July 2016 would add more than 2000 MW of thermal power to the grid. Besides, there would be the additional power available from solar and windmills.

While inviting investors, the brochure has announced that “Karnataka’s industrial relations make sure that not a single day is lost due to industrial disputes in the state of Karnataka.” Unfortunately, when the investors met in Bengaluru, one of the great automobile units in Dharwad, having foreign collaboration - Tata Marcopolo Motors Ltd– was facing labour unrest and went under lockout after that. It reminds the Nokia debacle surfaced earlier in Sriperambudur in Tamil Nadu.                 There is an urgent need for re-orientation of the labour policy, ensuring uninterrupted power supply and development of infrastructure facilities, before expecting foreign investments to pour in. A review of the promises made in the earlier global meets has to be done to assess the inadequacies in preparing the ground for the expected investment.


Inadequacies of infrastructure


The transport sector has been grossly neglected in the state’s planning process. Except the addition of Konkan railway about two decades ago, no new railway project was taken up in the state. The Ankola-Hubballi rail line, which was conceived many years ago, has not been taken up for implementation. Expanding railway track density in the state needs particular attention as major routes are saturated with line capacity utilisation. As far as the highways are concerned there are many missing links though some of the state highways are expected to be upgraded into national highways.

For augmenting urban water supply, the state has formulated a plan to lift water from Netravati river in Dakshina Kannada district and pump it up the western ghats to provide water to Kolar, Chikkaballapur and other districts. Pumping water from Netravati would lead to destruction of the region’s eco-system. It is like Tuglak’s shifting of his capital to Daulatabad, which a historian has rightly called a ‘monument of misdirected energy.’

Two smart cities in the offing

Among the list of 20 cities selected by the Government of India for implementing the Smart City project, Karnataka could get two centres - Davanagere and Belagavi. Davanagere city has a population of 4.34 lakh and 10 per cent of the population live in slums. Located in an area surrounded by cotton growing fields, it could have nurtured the textile industry long back. But it is no more a flourishing textile hub.

Belagavi has a slightly higher population of 5.1 lakh and 10 per cent of them are estimated to be living in slums. Once an important town in the old Bombay Presidency, it has now emerged as an important educational centre, with three universities, six engineering colleges, two medical colleges and four dental colleges. In the State Budget 2016-17, there is a proposal to provide piped natural gas to this city.

Instead of Davanagere, Karwar could have been a better choice. Nature smiles in the wilderness there with microscopic development. Though the Naval Base and the all-weather port have been developed here, full potentialities of this town, are not entirely exploited.

Mangaluru is the other port town in the state, which has missed the bus. While two port towns in Andhra Pradesh- Kakinada and Visakhapatnam- have been included in the first list of the proposed Smart Cities, at least, one of the port towns in Karnataka could have been selected. Hopefully in the next list of Smart Cities, two port towns from Karnataka - Karwar and Mangaluru- would be included.


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