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Productivity of Rural Credit: A Review of Issues and Some Recent Literature

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Abstract

The policy intervention in agriculture has been credit driven. This is even more pronounced in the recent interventions made by the State, in doubling agricultural credit, providing subvention and putting an upper cap on interest rates for agricultural loans, the package announced for distressed farmers. We use existing literature and data to argue that the causality of agricultural output with increased doses of credit cannot be clearly established. We argue that Indian agriculture is undergoing fundamental change wherein the technology and inputs are moving out of the hands of the farmers to external suppliers. This, over a period of time may have resulted in the de-skilling of farmers and without adequate public investments in support services and without appropriate risk mitigation products has created a near-crisis in agriculture. Thus, we argue that policy interventions have to be necessarily patient and holistic. Looking specifically at the rural financial markets, using some primary data we argue that it is necessary to understand the rural financial markets from the demand side. We conclude the paper by identifying some directions in which the policy intervention could move, keeping the overall rural economy in view rather than being unifocal about agriculture.

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  • Sriram M S, 2007. "Productivity of Rural Credit: A Review of Issues and Some Recent Literature," IIMA Working Papers WP2007-06-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
  • Handle: RePEc:iim:iimawp:wp02031
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    1. Robert Eastwood & Renu Kohli, 1999. "Directed credit and investment in small-scale industry in India: Evidence from firm-level data 1965-78," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 42-63.
    2. Robin Burgess & Rohini Pande, 2005. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," American Economic Review, American Economic Association, vol. 95(3), pages 780-795, June.
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    Cited by:

    1. Vinay Reddy Venumuddala, 2020. "Patterns in demand side financial inclusion in India -- An inquiry using IHDS Panel Data," Papers 2005.08961, arXiv.org.
    2. Sudha Narayanan, 2016. "The productivity of agricultural credit in India," Agricultural Economics, International Association of Agricultural Economists, vol. 47(4), pages 399-409, July.
    3. Paramasivam Ramasamy & Umanath Malaiarasan, 2023. "Agricultural credit in India: determinants and effects," Indian Economic Review, Springer, vol. 58(1), pages 169-195, June.
    4. Sudha Narayanan, 2016. "Productivity of Agricultural Credit in India: Assessing the Recent Role of Institutional Credit to Agriculture in India using State Level Data," Working Papers id:11195, eSocialSciences.
    5. Karmakar, K.G., 2008. "Trends in Rural Finance," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 63(1), pages 1-14.
    6. Rekha Misra & Pallavi Chavan & Radheshyam Verma, 2016. "Agricultural Credit in India in the 2000s: Growth, Distribution and Linkages with Productivity," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(2), pages 169-197, May.
    7. Kannan, Elumalai, 2011. "Relationship Between Agricultural Credit Policy, Credit Disbursements and Crop Productivity: A Study in Karnataka," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 66(3), pages 1-13.

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