A Study on the Contributions of PACS towards Inclusive Growth of Rural Economy

Credit cooperatives are regarded as an important source of agricultural credit for the vast majority of farmers in rural India. Institutions of Cooperative Credit had their launching in India after the enactment of Cooperative Societies Act of 1904 with the objective of emancipating the farmers from the clutches of money lenders. After independence a lot of efforts have been made by the Government of India and the State Governments to make the credit cooperatives efficient and farmer friendly. Indian economy is primarily agrarian in nature with more than 70% of the people living in rural areas. Agriculture happens to be the mainstay of livelihood for about 50% of the population of the country. Over the years cooperative credit has made phenomenal expansion in terms of membership coverage, credit advance etc. Primary Agricultural Cooperative Society (PACS) operates at the village level to cater to the credit needs of the farmers in rural areas. It may be observed that, the PACS is the foundation on which the entire cooperative structure is built upon. However many PACS suffer from small size, infrastructural weakness, operational inefficiency and structural flaws. In this context a number of Committees have been formed since 1945 starting from Cooperative Planning Committee to the latest, the Vaidyanathan Committee where recommendations were made to strengthen the cooperatives in the country. On the above backdrop the present article attempts to study the growth of cooperative credit particularly Primary Agricultural Credit Society (PACS) in terms of number of societies, membership, deposits, number of borrowers, loan advanced in India. It also focuses on the measures taken by different committees to revamp and revitalize the PACS. The study is primarily based on secondary data collected from the National federation of State Cooperative Banks Ltd. (NAFSCOB) and other published sources.


Introduction
Primary agricultural credit society (PACS) forms the base of the cooperative credit structure in India. India is primarily an agrarian economy where around 70 percent of the population lives in rural areas and 55 percent of the population depends on agriculture. Agricultural activities constitute the mainstay of the rural population in India. Adequate and timely availability of institutional credit plays a pivotal role in agricultural development, particularly in enhancing its productivity and improving the living standard of the peasant communities. It accelerates the pace of agricultural development if it is adequate in quantity, cheap, and timely made available [1] [2] [3]. Credit is not only a critical input in agriculture but it is also an effective means of economic transformation of rural areas. Growing commercialization, diversification and capitalization of agriculture through the use of modern technologies, largely driven by the forces of globalization, ipso facto, have increasingly raised the credit needs of the peasants [4]. The rural cooperative credit structure comprises of short term and long term cooperative credit structures. The short term credit structures is organised as a three tier system with State Cooperative bank at the apex, district central cooperative banks (DCCBS) in the middle and Primary Agricultural credit societies (PACS) at the base. PACS is organised at the village level that accepts deposits from rural farmers and gives loans for agricultural purpose. PACS is considered as vital agencies to resolve a host of problems in agricultural development and uplift the socio-economic status of the poor and weaker sections of the society [5].
Over the years, institutional credit has undergone a sea change. Since the inception of the cooperative movement in 1904 and more particularly in the post-independence era, a lot of reforms and restructuring have been carried out in the cooperative organization.

Review of Literature
Bhuyan, U. [9] has stated that certain factors such as Gross domestic factor, in- Kumar, V., Wankhede et al. [12] mentioned that members of cooperatives through the use of suitable farming systems, can generate year round employment and sustainable income by growing crops, vegetables, fruits and livestock.
However they need additional support to make the model sustainable.
Kannusany & Nirmala [13] have made a study on the growth of pattern of primary agricultural credit societies in India. The study explains the vital role Choudhuri, Shinde and Mahod [14] studied the crop loans provided by PACS and its utilization by the farmers. It also made a study on the repayment of crop loan by the cotton growers. The success of cooperatives with regard to recovery of crop loan largely depends on the productive utilization of agricultural credit by the borrowers. The study showed that the recovery of crop loan by PACS was low because the loan taken for cultivation of cotton crop was not utilized productively. Hence, there is a need to monitor the utilization of crop loan by cotton growers.
Sudarsan Nayak [15] conducted a study on cooperative credit in Odisha. His study revealed that cooperative credit societies constitute an integral part of state agricultural development programme as it renders 70% of total agricultural credit requirement of the state. The cooperatives are considered as an effective mechanism of structural change. It needs to be strengthened with high degree of professionalization, strive for an objective orientation.
The above studies focus on the importance of PACS in the development of agriculture. The studies have also identified a gap where it is difficult for small farmers to get loan advances and then there is undue pressure from financial institutes to repay the loan.

Objectives
On the above backdrop, the objectives of our study are as follows: 1) To study the growth of PACS in terms of number of societies, membership, number of borrowers, deposits and loans advanced that will give an insight into the spread and level of involvement of PACS in the rural areas.
2) To study the recommendations made by various committees over the years as the PACS suffers many weaknesses and needs to be revamped in the wake of increased competition from other financial institutions.

Significance
As mentioned above, India is predominantly an agrarian economy as more than 50 percent of the population depends on agriculture. PACS caters to the short term credit needs of the small and marginal farmers. The timely availability of loans will support the rural farmers to enhance the productivity in agriculture and that would lead to an overall growth of the economy. This research gives an insight to the outreach of PACS through short term credit disbursement to the rural farmers in India over the decade.

Methodology
The present study is based on secondary data collected from the websites of NAFSCOB, RBI and other published sources, books and journals. The study attempts to study the growth of PACS in terms of number of societies, membership, number of borrowers, deposits and loans advanced, for this purpose a compound annual growth rate (CAGR) is calculated by taking the data for a pe- The recommendations made by different committees to revamp the PACS were studied from various government publications and reports that have been published from time to time.

Analysis
The current study has been conducted and data analysed in two sections. Section A deals with calculation of Compound Annual growth rate (CAGR) to study the growth of PACS in terms of number of societies, membership, number of borrowers, deposits and loans advanced.
Section B deals with the study of recommendations made by different committees to revamp and revitalize the PACS.

Section A
Study the growth of PACS in terms of number of societies, membership, number of borrowers, deposits and loans advanced.
The data relating to the number of societies, membership, number of borrowers, deposits and loans advanced is given in Table 1 and Table 2.  Figure 1 shows that there has been a fluctuating growth in the number of societies.
In Figure 2 the total number of members shows a steady growth of 15.45% over time.
In Figure 3 the total number of borrowers has increased over 10 years by 19160. The total number of borrowers has decreased drastically from year 2009-2010 to 2011-2012 by 24.93%. This is due to decrease in number of societies and members. But in the 10 years span, total number of borrowers has increased by 27.28% with respect loan amount taken by borrowers is increased by 13.28%.
In Table 2 the total number of borrowers has increased by 19160 over 10 years.     PACS like taking loan, and depositing money. The CAGR of total members shows a minimal increase of 1.44% but the total amount of deposits has increased by 16% thus indicating the faith people have in PAC.
In Figure 4 short term Loan advanced has been significantly increasing throughout the period of 10 years.  In Figure 5 the total deposits show a phenomenal increase of 350% over the span of 10 years.

Section B: A Study on the Recommendations Made by Different Committees over the Years
Although PACS has widened their scope in terms of memberships, deposits and loans advanced, yet it suffers from many operational and managerial shortcomings. PACS is increasingly facing competition from other financial institutions like scheduled commercial banks, regional rural banks etc. hence the Government of India and the Reserve Bank of India have set up various committees to review and restructure the non performing PACS (Senapati S. [17]). Some of the important committee recommendations are as follows.

Capoor Committee (2000)
In its report examined the various causes of continued weakness in the cooperative sector and suggested appropriate measures to revitalize and revamp the cooperatives in India. According to this report the vital link in the short term co-   erative Act both in letter and spirit. In order to enhance member participation in cooperatives and to do away with the non-user members, the Act must provide a definition of "Active member". The active member would have the right to vote and contest. It should also make provision for speedy exit of non-user member.
It was also of view that the constitution should be amended to give more autonomy to cooperatives. It suggested that the utility of various tiers of the cooperative structure be examined and actions should be taken to delayer the structure in case it is not found to be cost effective.

Conclusion
The study shows that number of PACS, number of members, deposits and bor-