Growth, structure and cost of agriculture credit: a study of Punjab

Abstract

The study had been devised to have an in depth knowledge about farmer’s access to credit, also in relation to inputs use as well as farm investments, utilization of credit and cost of credit pertaining to borrowing as well as lending aspects. Both primary as well as secondary sources of data were tapped for the study. Agricultural credit in terms of availability as well as outstanding has shown an increasing trend both at all India level and the State level. The share of noninstitutional agencies in agricultural credit was found to be decreasing. The elasticity of inputs use to input-output price ratio had been (-) 0.39 and that of private investments to input-output price ratio (-) 1.49. The contribution of institutional credit in promoting use of production inputs and private capital investments was found to be significantly positive. The amount of loan had been found to be maximum for purchase of land, followed by tractors and submersible pumps. Farm size, education status of the borrower and non-farm income were found to be significant factors to cause a decline in the diversion of loan, while source of loan as well as cost of loan have emerged as non-significant factors. Average transaction cost of obtaining loan is calculated at Rs. 861 per farm in the state, with maximum component of bribe followed by food expenses and legal charges.