. 12. in recent years, yields of crops have remained low and there has been a progressive hike in minimum support price ( msp ) for wheat and rice. this may be seen as a continuation of policy tilt in favour of price intervention as against non - price intervention followed in the post - reform years. this has ensured sufficient and steady procurement of foodgrains which can cater to meet the demand of the public distribution system ( pds ) and various welfare schemes of the government. however, for various reasons, off - take of foodgrains has not kept pace with procurement. 13. skewed incentives as regard rice and wheat have affected land use and cropping pattern with public procurement remaining concentrated in a few states. currently in most states, the msp is a purely a notional price as far as farmers are concerned. farmers know that they have an option to sell their produce at msp but they have no access to government granaries or take - in windows. 14. lower off - take, despite adoption of the decentralized procurement scheme ( dcp ) under which foodgrains are procured and distributed by the state itself, combined with higher procurement has resulted in large stocks of foodgrains, which are often higher than bis central bankers ’ speeches the required buffer norms and food security reserves. in the past three decades, except for a few years, aggregate procurement of rice and wheat has been higher than their off - take. 15. to sum up, indian agricultural situation today, therefore, is a mix of declining yields, low productivity, inter and intra - state and regional disparities, skewed incentives and inappropriate food stock management in the backdrop of increasing concerns on food security and food price volatility. in this context, a frequent refrain is that credit is not available. while empirically this is not the case, let me ask you all whether credit is an important component of raising productivity? if yes, then do we know the direction of credit? can credit alone solve all the problems of declining or low agricultural productivity and how, after all, do we improve productivity? i would like to focus on major trends in agricultural credit and its role in improving productivity. trends in agricultural finance 16. in india, where the formal financial system is predominantly bank - oriented, banks play an important role in financing the needs of agricultural sector. with the aim of facilitating the timely and adequate credit flow to agriculture, the sector has been targeted as a part of the

the conservation of natural resources. it was only in the fitness of things that he delivered the inaugural address today. sir, we are overwhelmed by your insightful address and i am sure all of us have immensely benefited listening to his valuable views on a subject which is not only very dear to you but also so vital for the country ’ s economic growth. 4. i also note that the seminar includes several eminent speakers with vast experience on the subject. there are sessions on agricultural productivity, role of research and technology in improving agricultural productivity, linkages between productivity and farm income, incentivizing productivity enhancing investments, relation between credit growth and productivity growth and mitigation of risks in agriculture. in my address today, coming as do from the rbi, i would broadly focus on major trends / issues in agricultural productivity and credit, and the role of agricultural credit in improving agricultural productivity. i would also touch upon some of the steps that can yield results in the short - term. importance of agriculture 5. as you are aware, the recent indian growth story has been service - led. services sector has completely replaced agriculture, which was traditionally the largest contributor to india ’ s gdp. however, the fact that agriculture has the smallest share in gdp of only about 14 per cent today from a high of more than 50 per cent, does not belittle its importance for bis central bankers ’ speeches the indian economy. this is because first, as we all know, agriculture remains the largest employer having a share of around 60 per cent. secondly, it holds the key to creation of demand in other sectors and remains by far an important indirect contributor to india ’ s gdp growth. the agriculture sector needs to grow at least by 4 per cent for the economy to grow at 9 per cent. thus, though having a small share, the fluctuations in agricultural production can have large and significant impact on overall gdp growth. thirdly, since food is an important component in basket of commodities used for measuring consumer price indices, it is necessary that food prices are maintained at reasonable levels to ensure food security, especially for the deprived sections of our society. in fact, food security is emerging as an important policy concern, and the role of agriculture in ensuring equitable access to food has added a new perspective for policy makers. trends in agricultural productivity 6. i would like to discuss certain trends in agricultural productivity in india. as is wellknown, the year 1968 marked the beginning of a turning point in indian agriculture. the country