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Financial Planning for Farmers

IndianMoney.com Research Team | Posted On Friday, August 30,2019, 04:35 PM

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Financial Planning for Farmers

 

 

Farming is an essential part of our economy and is crucial for survival. Almost 70% of the rural population depends on agriculture. The farmers contribute a significant percentage to India’s GDP and many industries in India are directly dependent on farmers for the supply of raw materials (agro-industries).

Without agriculture or agro-based products, the Indian economy would not be in great shape. Empowering farmers with better seeds, irrigation facilities, fertilizers, tractors and agricultural equipment is the need of the hour. The Government plans to double farmer’s income by 2022.

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Financial Planning for Farmers

What is Financial Planning?

Financial planning is a method that determines how a business or an individual is able to achieve strategic goals and objectives by considering various important factors.

The process of financial planning includes accessing finances like the number of assets owned, short and long-term financial goals and risk appetite.

Financial planning helps ensure a reasonable balance vis-a-vis flow of funds; so that the farmer can focus on agriculture as well as save money for the future.

Many farmers commit suicide due to heavy debts. Lives of farmers can be saved with financial planning.

People involved in the agricultural sector must follow the below-mentioned steps for financial planning:

  • Determine your current financial situation
  • Understand the financial goals you seek to achieve in the short term and long term
  • Identifying methods that can increase your agricultural produce or income
  • Identifying alternative sources of income like animal husbandry, livestock and cattle farming
  • Implementing the plan into action
  • Re-evaluating the plan according to change in circumstances

See Also: What Does A Financial Advisor Do?

Why is Financial Planning Important for Farmers?

Financial planning is the key to any business and it is an essential part for people engaged in farming. One of the key benefits of financial planning is the ability to cut costs and make the most out of available resources.

To increase farm productivity, farmers must first concentrate and resolve issues like fragmented land holdings, choose crops and seeds according to soil conditions, reduce the usage of chemical fertilizers and increase the use of bio-manure, creating proper irrigation facilities through rainwater harvesting, and improved mechanization in farms.

Financial planning helps farmers control the cost at the various stages of agriculture, make an annual budget, plans for reducing wastage and monitor these plans to make them work.

See Also: Step By Step Financial Planning

After years of hard work and toil, farmers must ensure they enjoy a secure retirement and meet family obligations like children’s marriage, medical expenses and so on. To achieve these goals:

  • Stop wasting money
  • Avail PMJJBY and PMSBY for life and accident cover
  • Benefit from government programs like Pradhan Mantri Fasal Bima Yojana and Kisan Vikas Yojana
  • Enrol under the popular government health insurance scheme, Ayushman Bharat
  • Make sure to invest money regularly in FDs or RDs to maximize returns
  • Use government labs for soil testing to increase the productivity of farms. 
  • Review your insurance and monitor your investments each year.

Additional Schemes for Farmers:

  • Pradhan Mantra Jeevan Jyoti Bima Yojana:

The Pradhan Mantra Jeevan Jyoti Bima Yojana or PMJJBY is a government-funded term insurance plan, which offers insurance cover to citizens. The policy offers a death benefit of Rs 2 Lakh. The scheme can be renewed each year and availed at a premium of Rs 330 a year, across age groups. This policy is an ideal option for farmers to meet life insurance needs.

  • Pradhan Mantri Suraksha Bima Yojana:

The Pradhan Mantri Suraksha Bima Yojana or PMSBY is a personal accident insurance plan which covers accidental death and disability. The annual premium is just Rs 12 and is auto-debited from the bank account. The plan offers Rs 2 Lakh for permanent total disability and death in accidents.

Investment Options for Farmers:

Kisan Vikas Patra or KVP Scheme is one of the most preferred investment schemes for farmers and people engaged in farming activities. This is a government backed scheme. KVP investments have no upper limits. You can invest in KVP scheme through post offices and banks.

If you stay invested in KVP for close to 10 years, money doubles. KVP can be used as collateral to get loans. KVP offers an interest rate of 7.6%. Premature encashment is allowed after two and a half years, subject to certain conditions.

See Also: Golden Rules of Financial Planning

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