Assessing social capital and its impact on economic performance: A comparative study of members and non-members of farmer producer companies in India

Abstract

Farmer producer companies (FPCs), modern farmer collectives registered under India’s Companies Act, play a crucial role in providing core services like input supply, marketing, technical, and financial support, as well as auxiliary services such as social capital and consultancy, which are linked to higher economic performance and innovation. The study analyzes the levels of social capital among members and non-members of FPCs and their relationship to the economic performance of their members. The data on social capital were collected from 20 FPCs (292 members and 77 non-members) from Maharashtra state of India. Unpaired student T-tests and Mann-Whitney tests were performed to compare the levels of social capital among the members and non-members. OLS regression was performed to understand the difference in social capital and its effect on economic performance. The results reveal that all the indicators of social capital were significantly higher for the members (Mean = 4.27) than for non-members (Mean = 3.14). The social capital indicators related to membership and participation in groups (p-value < 0.10) and the sharing of production and other information (p-value < 0.01) positively affected economic performance. Higher levels of education (p-value < 0.05) and frequent contact with members (p-value < 0.01) positively affected, whereas higher landholding (p-value < 0.10) and years of membership (p-value < 0.01) negatively affected the economic performance of members. As the Indian government plans to add 10,000 FPCs in the next three years, the strategy to increase the social capital of FPCs may enhance the overall resilience and sustainability of rural economies.