Rising rural incomes from cash crops, higher grain prices and the employment guarantee scheme are prompting farmers to turn to mutual funds, insurance, real estate and commodities futures, creating exciting opportunities for financial services companies. Gold and silver continue to lure farmers, though an increasing number is gradually moving away from small savings. But there are regional variations. In West Bengal, chit funds have become a favourite in rural areas while Punjab’s affluent farmers are investing in real estate, including commercial property in cities such as Chandigarh.Farmers say the Mahatma Gandhi National Rural Employment Guarantee Scheme is helping their families think about investing. The mutual fund industry is actively looking at rural India for increasing its client base.
Insurance companies are also excited by the trend. Some affluent farmers are dabbling in commodity trading.
The shift to new instruments is reducing small savings, particularly in West Bengal, where chit funds have mushroomed in the past two years. Some government officials said chit funds are swallowing up rural savings. Small savings in the state dropped from Rs 32,000 crore in 2010-11 to Rs 23,000 crore in the last fiscal. In the first eight months of the current financial year, small savings amounted to just Rs 16,000 crore. In north India, many farmers are find real estate much more attractive. For instance, potato seed farmer Sukhjeet Singh Bhatti from Jalandhar feels that it makes sense to invest in Chandigarh, which is 135 km from Jalandhar town, as real estate prices are appreciating at a faster pace compared to gold and fixed deposits. Better returns from sale of agricultural land has also prompted some farmers to invest in commercial and residential properties in cities.
Economists are bullish about the investment muscle of rural India. “Gujarat, Maharashtra and Andhra Pradesh will be the most progressive states, investment-wise, by 2020. Opportunities will also emerge in the Bimaru states of Bihar, Madhya Pradesh, Rajasthan and UP,” said Arun Singh, senior economist, Dun & Bradstreet India.
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