In the evolutionary panorama of Indian agriculture, a financial tool, silently transforming the way in which rural India accesses credit: the fine of basic products is. Traditionally, farmers have depended a lot in informal credit sources: lenders, intermediaries and anticipated sales. These driving practices for sale of anguish, where farmers are forced to sell their products immediately after harvest at subopymal prices. However, basic products are now emerging as a change of play, aligning financial access with market efficiency and providing farmers with the power to maintain their products until prices are favorable.
What is the fine of basic products?
Basic products finance is a short -term guaranteed loan center where the stored products of farmers or merchants serve as a guarantee. The institutions, including banks and NBFC, the financing of sacrificers against warehouse receipts, thus ensuring that the loan is backed by tangible assets stored in certified stores. These receipts act as proof of property and quantity of goods, generally stored in accredited warehouses under adequate conditions.
Rural credit boom: a snapshot
India is currently witnessing rural credit, promoted by the increase in rural income, digitalization and financial inclusion initiatives such as Pradhan Mantri Jan Dhan Yojana (PMJDY), Kisan credit card Scheme (KCC) and expanded access to mobile bank transfers and direct benefits (DBT). The KCC scheme, in particular, has played a transformative role by offering farmers timely credit and affordable for crop cultivation, harvest, subsequent needs to harvest and allied activities such as dairy and fisheries.
Together, these efforts have expanded the basis of formal credit in rural areas, reducing the dependence of informal money lenders and the opening of doors for more structured financial instruments, such as the fine of basic products, are rooted and flourished. The compliance with RBI data, credit to agriculture and allied activities grew by 15 percent year -on -year in October 2024, compared to 17 percent observed in the same month last year. The government approach to double the income of farmers and provide timely access to formal credit has further stimulated this increase.
However, the quality and utility of this credit determine how transformer is really. The financing steps of basic products here, offering more than liquuidity, offers farmers negotiation and control power over their decisions after harvesting.
The link between the financing of basic products and the best pricing
One of the most important challenges faced by Indian farmers is the sales of anguish. Once a crop is harvested, small and marginal farmers, which constitute more than 85 percent of the agricultural community of India, lacking the financial cushion to expect better prices. They are immediately sold to any rate offered by the local mandis or merchants. This reactive sales model not only undermines its income, but also interrupts market balance by flooding the supply duration periods.
The financing of basic products allows strategic sale. By accessing credit against stored products, farmers can meet their immediate cash needs (for household expenses, loan payments, supplies purchases for the next planting cycle) without having to sell prematurely. This waiting period often translates into a higher 20-30 percent prices, especially in markets where price fluctuations are seasonal or demand.
Empower farmers through infrastructure and institutions
The success of the basic products fine depends on a robust agricultural acrystation infrastructure and regulated market practices. The emergence of private actors and initiatives backed by the Government such as the Market of National Electronic Agriculture (E-NAM), the negotiable warehouse recipient (NWR) system and integrated cold storage solutions are accessible and accessible.
NBFC such as Kissandhan and new agricultural companies are also innovation to reach last mile farmers with digital tools, simplified documentation, faster disbursement, attractive interest rates and approval of real-time loans. This fusion of technology with finance makes it easier for Smallholters to access capital in favorable terms, reducing dependence on exploitation sources.
Creating a resistant rural economy
The implications of the finance of the basic products go beyond individual gains. It promotes prices stability, reduces market volatility and improves the efficiency of the agricultural supply chain. With better control over their products, farmers can also explore contract agriculture, bulk sales and group marketing through farmers’ producers organizations (FPO). All these elements create a more resistant and self -sufficient rural economy.
In addition, as farmers begin to see that their crops not only produce, but also financial assets, they are likely to adopt best storage, classification and quality control practices, which increases the commercialization of Indian agricultural products.
Thanks to several campaigns executed by the Government, NBFCS, FPO to improve financial education and awareness of basic products at grass root level. Our farmers now know the benefits of scientific storage, price movements, access to warehouse receipts, etc. This cultural change towards the maximization of value and self -sufficiency is promoting the demand for structured loans of basic products.
The way ahead
While the multitude of basic products has a tremendous potential, there are challenges. These include awareness among farmers, the lack of warehouse penetration in remote areas and complex paperwork. For truly democratism, this tool, interested parties, governments, financial institutions, agricultural technology platforms and rural development agencies collaborate to improve last mile connectivity, ease of access and education of farmers.
Basic products finance are more than a credit product: it is a catalyst for rural empowerment. Align economic need with market intelligence, allowing farmers not only to grow more, but also win more. As India strives towards an economy of $ 5 billion, building a strong rural credit trunk network through tools such as basic products will be key to achieving inclusive and sustainable growth.
The author is CEO, Kissandhan