Moving Beyond Production Credit to Finance Agri Value Chains

India's agricultural credit system was built over six decades primarily to finance production, not the value chain that follows harvest. Bank nationalisation, cooperative credit institutions, the Regional Rural Banks Act, 1976, and later the Kisan Credit Card scheme expanded farmers' access to seasonal crop loans. NABARD, set up in 1982, became the apex refinancer and supervisor of this rural credit architecture. These reforms succeeded in their original goal: they helped end famine-level food shortages and built the buffer-stock based food security system India relies on today.

However, production credit and post-harvest financing are not the same thing, and the policy discourse often conflates the two. A useful distinction is between genuine public investment in agriculture and subsidy-type income support. Computerising Primary Agricultural Credit Societies (PACS), building social capital in farming communities, and government-constructed cold storage facilities are durable investments that expand productive capacity. Minimum Support Price payments, free electricity, and loan waivers are transfers that support farmer income in the short run but do not build infrastructure. The next phase of agricultural transformation depends heavily on the first category, since storage, processing, and logistics capacity is exactly what determines how much value farmers and rural enterprises can capture after harvest.