The Expert Group on Investment Credit, chaired by Y. S. P. Thorat, Managing Director, NABARD, was formed by the Reserve Bank of India in response to declining investment credit for agriculture. Members included M. S. Sriram (Professor, IIM Ahmedabad); O. P. Bhatt (Managing Director, State Bank of Travancore); Nachiket Mor (ED, ICICI); P. H. Ravikumar (CEO, NCDEX); R. Radhakrishna (Director, IGIDR); U. S. Awasthi (IFFCO); and C. S. Murthy (CGM-in-charge, RPCD, RBI, Member Secretary). The group was tasked with analyzing trends in agricultural investment credit over the past decade, assessing the impact of innovations, and drafting a roadmap to increase investment in agriculture. The group focused on meeting the government’s goal of doubling agricultural credit between FY 2004/05 and 2006/07, given the imperative to modernize Indian agriculture to meet both domestic and global needs.
The report found that the share of public sector investment in agriculture declined significantly during the 1990s, dropping from 45% in the 1980s to 23% by 2002–03. Meanwhile, private investment grew substantially, accounting for 77% of the total agricultural investment by 2002–03. The expert group emphasized the need for public sector investment in infrastructure, such as irrigation and rural electrification, which it identified as crucial for enabling private sector investment growth. It also highlighted the increasing gap between investment trends, on the one hand, and investment targets set by the 10th Five-Year Plan and the government’s credit-doubling program, on the other. Sectoral investments showed slower growth in key areas such as farm mechanization and irrigation but faster growth in marketing and storage infrastructure.
The expert group also examined recommendations from earlier committees, such as the Agricultural Credit Review Committee (1989), the Vyas Committee (2001, 2004), and the Gupta Committee (1997). Many of these committees had stressed the importance of improving land consolidation, updating land records, promoting efficient irrigation systems, and integrating investment and production credit. The Thorat group incorporated these recommendations into its roadmap, particularly regarding improving land use, promoting micro-irrigation, and increasing mechanization. Additionally, it stressed the need for financial institutions to focus on term credit to support long-term agricultural investments and to address regional disparities in credit distribution, particularly in less developed states with lower credit–deposit ratios. The expert group’s roadmap aimed to increase the flow of investment credit by prioritizing public investment in infrastructure.
The group’s recommendation to increase public investment in agricultural infrastructure like irrigation was accepted, leading to initiatives such as Pradhan Mantri Krishi Sinchai Yojana. Commercial banks were encouraged to focus more on term credit. However, efforts to increase credit–deposit ratios in underdeveloped regions were meager because of logistic challenges and infrastructure gaps.
The Thorat Expert Group’s recommendations aimed to revitalize agricultural investment credit by emphasizing public infrastructure and private participation, though regional disparities remain a challenge.
