Estimating contribution of institutional credit in agricultural growth of Punjab
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Date
2011
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Punjab Agricultural University
Abstract
This present study was conducted to estimate the contribution of institutional credit to agricultural growth in the state of Punjab. The primary data were collected from 300 farmers for the crop year 2008 in three districts of Punjab viz. Hoshiarpur, Ludhiana and Bathinda representing Kandi Zone, Central Zone and Cotton Zone, respectively. The study revealed that an average sample farm in the state availed ` 87540 of credit of which 56.78 per cent was short term credit and the remaining 43.22 per cent was the long term credit The share of institutional credit accounted for 78.11 per cent and the remaining 21.89 per cent was provided by non-institutional sources. The concentration of credit was highest in Zone III followed by Zone II and Zone I. Further, the distribution of credit was skewed against small borrowers. The gini coefficients were greater than 0.6 in all the zones as well in the state. A simultaneous equation model has been used to estimate the contribution of institutional credit towards use of production inputs, private investments and agricultural growth. The analysis revealed that increase in short term credit by one percent lead to increase in use of fertilizers and pesticides by 0.57 while the increase in long term credit by one per cent raised the capital investments by 0.68. Agricultural growth in the state was inputs and capital responsive. The results have further exhibited significant and positive impact of fertilizers and pesticides use on gross farm income with elasticity of 0.66. The elasticity of gross farm income to capital investments was 0.62. Thus, agricultural credit by promoting input use and capital investments emerged as the important contributor to agricultural growth in Punjab. Demand for and supply of agricultural credit was also examined on different farm size categories in different zones of the state. The supply of short term credit was more than its demand by 9.97 per cent on medium farms and by 8.30 per cent on large farms. However, the supply of institutional credit inadequate to meet the credit requirements of small farmers by 2.27 per cent. Similarly, supply was short of demand by 2.74 per cent on semi-medium farms. Farm size wise analysis showed that severity of problems while accessing institutional credit was different for different categories of the farmers. In general, problems were more common on small farms than larger ones.
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Keywords
credit, armers