Agricultural Credit in Punjab: Have Policy Initiatives Made a Dent in Informal Credit Markets?

Agrarian credit markets have been at the centre of policy intervention in India since the beginning of the last century, when the cooperative movement was launched in an attempt to provide an institutional alternative to the exploitative moneylenders. Yet, providing adequate and timely institutional finance to farmers continues to be one of the most intractable problems. The focus of this paper is on the agrarian credit markets in the state of Punjab, once labelled as India’s most successful experiment in agricultural development. However, the state has now been caught up in a severe agrarian crisis, with indebtedness of farmers and their ensuing suicides occupying centre stage. This is symptomatic of the alarming dominance of informal lenders engaged in exploitative practices through interlinking the credit market with output, input and labour markets, and the failure of the institutional credit set up to thwart such practices. The study thus traces in general the growth trajectory of the agrarian credit structure in Punjab, while also reflecting on the presence of interlinked credit transactions. The features and impact of such transactions have been documented using empirical data from a revisit microstudy carried over a twenty-year period in a single district of Punjab.