Agricultural credit and productivity of crops in India: field evidence from small and marginal farmers across social groups

Abstract

PurposeThis work examines the impact of institutional agricultural credit on crop productivity of some major crops such as paddy, cotton, wheat and pulses for small and marginal farmers across various social groups.Design/methodology/approachThe cross-sectional field data on socio economic variables was collected from three Indian states from about 400 small and marginal farmers across various social groups using multi-stage stratified random and purposive sampling through a structured questionnaire by interviewing. The method of propensity score matching (PSM) was employed to calculate average treatment effect (ATE) and average treatment effect on the treated (ATET) by categorising sample farmers as treatment group and control group where crop productivity was considered as outcome variable and access to institutional credit was considered as treatment variable.FindingsThe PSM estimates reveal that ATE and ATET for all the selected crops are found to be significantly higher for the treated group vis-à-vis non-treated group suggesting that institutional agricultural credit has a statistically and significant positive impact on the crop productivity.Research limitations/implicationsSimilar study can be extended for more crops and across regions in India for a universal coverage.Originality/valueThe agricultural credit policy of India has been to increase the access and availability of institutional farm credit. This has led to in general increase in the flow of formal farm credit to agricultural sector. However, the impact of institutional credit and crop productivity especially for small and marginal farmers across social groups is not well recognized in India using field data. Accordingly, this field data study contributes to the existing research by providing fresh evidence from field across social groups for both kharif and rabi crops using recent survey data from small and marginal farmers which has important policy implications.

The Relationship between the Sharecropping System, Informal Credit, and Productivity: The Empirical Evidence from the Madurese Traditional Solar Salt Business

“…Result also found that inefficiency level was significantly high for fifty-fifty input-output share tenant and only output share tenant compared to cash tenant and owner operator implying that Marshallian inefficiency exist due to sharecropping system in the Boro rice production. Yadav & Rao (2022) stated that based on the propensity score matching (PSM) estimation, revealed that average treatment effect (ATE) and average treatment effect on the treated (ATET) for all the selected crops are found to be significantly higher for the treated group vis-à-vis non-treated group suggesting that institutional agricultural credit has a statistically and significant positive impact on the crop productivity. So, it was clear that there is a positive relationship between sharecropping system, informal credit, and productivity.…”

“…Studies and research on traditional solar salt businesses explain that financing is a key determinant of the success of solar salt businesses. Financing plays a supportive role in the implementation of agricultural activities, having a crucial impact on funding all farming activities, including both fixed costs and variable costs (Abdallah, 2016;Anang et al, 2016;Yadav & Rao, 2022). Furthermore, this business which is notorious for having high variable costs further emphasizes the importance of financing as a crucial supporting factor to ensure optimal results for solar salt farmers.…”

Reconsidering agricultural credits and agricultural production nexus from a global perspective

“…A substantial number of recent studies have been devoted to investigating the effects of agricultural credits on agriculture. While some of these studies used household/farm-level data such as Chandio et al (2017), Ullah et al (2020), Chandio et al (2021), Ma et al (2022), andYadav andRao (2022), some of them identified and addressed linkages using country-level data such as Misra et al (2016), Rehman et al (2017), Anh et al (2020), Seven and Tumen (2020), Manoharan and Varkey (2021), Chandio, Abbas, et al (2022), Chandio, Jiang, et al (2022), and Mahapatra and Jena (2023). The majority of the studies in the first category concluded that agricultural credits help to improve agricultural production efficiency.…”

Impact of credit access on farm performance: Does source of credit matter?

“…This is the right step, as a similar program has proven empirically effective. Studies in developing countries such as India [ 10 ], Ghana [ 11 ], Pakistan [ 12 ], and Senegal [ 13 ] show identical results, stating that the ability to obtain credit boosts agricultural productivity and technical efficiency. It can help farming households increase their productivity as they can procure more sophisticated technology [ 14 , 15 ] and improve production efficiency as they can procure superior inputs and seeds [ 16 ].…”