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Credit Policy for Agriculture in India - An Evaluation: Supporting Indian Farms the Smart Way: Rationalising Subsidies and Investments for Faster, Inclusive and Sustainable Growth

dc.contributor.authorAnwarul Hoda
dc.contributor.authorPrerna Terway
dc.date.accessioned2019-08-13T15:20:32Z
dc.date.available2019-08-13T15:20:32Z
dc.date.issued2015-06-30
dc.identifier.urihttp://hdl.handle.net/11540/11012
dc.description.abstractRural indebtedness and dependence on private moneylenders is an age-old problem in India. For more than 100 years now, the Central Government and the Reserve Bank of India have been making efforts to enhance institutional credit in rural areas particularly to assist in agricultural operations. It began with the enactment of the Co-operative Credit Societies Act (1904) but efforts were redoubled after the nationalisation of Scheduled Commercial Banks in 1969. The aim of this paper is to evaluate the measures taken over the years and assess the extent to which they have been successful. It attempts to answer the question, “Is the agenda of expansion of institutional finance to agriculture unfinished?” The findings in the paper are inconclusive on this issue on account of contradictions in evidence: while the 2013 AIDIS survey finds that noninstitutional lenders still account for only 36 per cent of the total outstanding agricultural loan, the short-term credit from institutional sources in 2012-13 covered 100 per cent of the input cost in agriculture in that year according to the National Accounts Statistics. A particular focus of the paper is analysis of the cost and benefits of subsidies for agricultural credit and generalised debt waivers. It finds that the steps taken to enhance institutional credit such as the opening of a large number of rural branches of commercial banks, priority sector lending with 18 per cent target for agriculture, Kisan Credit Cards and the financial inclusion initiative have really been instrumental in the impressive rise in agricultural credit and not credit subsidies. At the same time, the sharp rise in the share of short-term credit in the proportion of input costs points towards diversion of subsidised credit for non-agricultural purposes. The paper, therefore, makes a strong case for a serious review of the policy on agricultural credit subsidies. On generalised debt waivers, the finding is that they create expectations of similar waivers in future and disincentivise farmers from repaying loans. At the same time, anticipating adverse borrower behaviour, lenders tend to reduce the size of their lending operations; the net result is a contraction of credit available to farmers. The paper, therefore, also argues strongly against generalised waivers in future. However, targeted action where waivers follow a case by case examination of the merits of the case can be an appropriate response, particularly if such action is part of a comprehensive package to address acute agricultural distress.
dc.languageEnglish
dc.publisherIndian Council for Research on International Economic Relations
dc.titleCredit Policy for Agriculture in India - An Evaluation: Supporting Indian Farms the Smart Way: Rationalising Subsidies and Investments for Faster, Inclusive and Sustainable Growth
dc.typeWorking Papers
dc.subject.expertAgricultural education
dc.subject.expertAgricultural information
dc.subject.expertAgricultural statistics
dc.subject.expertSustainable agriculture
dc.subject.expertCommercial agriculture
dc.subject.expertAgricultural And Rural Development
dc.subject.expertAsian Development Bank
dc.subject.expertWater Resources Development
dc.subject.expertSustainable Development
dc.subject.expertDevelopment Economics
dc.subject.expertRegional Economic Development
dc.subject.expertEconomic Impact
dc.subject.expertAsian Development Bank
dc.subject.expertDevelopment
dc.subject.expertMacroeconomic
dc.subject.expertMacroeconomic Analysis
dc.subject.expertMacroeconomic Framework
dc.subject.expertMacroeconomic Models
dc.subject.expertMacroeconomic Performance
dc.subject.expertMacroeconomic Planning
dc.subject.expertMacroeconomic Policies
dc.subject.expertMacroeconomic Reform
dc.subject.expertMacroeconomic Stabilization
dc.subject.adbAgricultural education
dc.subject.adbSustainable development
dc.subject.adbEnvironmental management
dc.subject.adbAgricultural investment
dc.subject.adbAgribusiness
dc.subject.adbAgroindustry
dc.subject.adbAgricultural institutes
dc.subject.adbAgricultural development
dc.subject.adbdistribution
dc.subject.adbJoint projects
dc.subject.adbDevelopment models
dc.subject.adbIndustrial policy
dc.subject.adbEducation
dc.subject.adbSocial Development
dc.subject.adbEconomies in transition
dc.subject.adbEconomic agreements
dc.subject.adbDevelopment indicators
dc.subject.adbADB
dc.subject.adbEconomic development
dc.subject.adbGross domestic product
dc.subject.adbEmployment
dc.subject.adbEconomic forecast
dc.subject.adbEconomic indicators
dc.subject.adbGrowth models
dc.subject.adbGross domestic product
dc.subject.adbMacroeconomics
dc.subject.adbEconomic forecast
dc.subject.adbSocial condition
dc.subject.adbEconomic dependence
dc.subject.adbEconomic assistance
dc.subject.adbTechnology assessment
dc.subject.naturalEconomic development
dc.subject.naturalNew agricultural enterprises
dc.subject.naturalCooperative agriculture
dc.subject.naturalGovernment policy
dc.subject.naturalEntrepreneurship
dc.subject.naturalFood Supply
dc.subject.naturalFood Security
dc.subject.naturalOrganic dairy farming
dc.subject.naturalOrganic floriculture
dc.subject.naturalOrganic viticulture
dc.subject.naturalProduce trade
dc.subject.naturalCrop
dc.subject.naturalOrganic gardening
dc.subject.naturalEconomic development
dc.subject.naturalNew agricultural enterprises
dc.subject.naturalCooperative agriculture
dc.subject.naturalGovernment policy
dc.subject.naturalEntrepreneurship
dc.subject.naturalRural land use
dc.subject.naturalLand use
dc.subject.naturalNatural resource
dc.subject.naturalWater supply
dc.subject.naturalMill
dc.subject.naturalIrrigation systems
dc.subject.naturalComparative economics
dc.subject.naturalRegional economics
dc.subject.naturalEconomic development projects
dc.subject.naturalOpen price system
dc.subject.naturalPrice fixing
dc.subject.naturalPrice regulation
dc.subject.naturalConsumer price indexes
dc.subject.naturalFinancial crisis
dc.subject.naturalLabor economics
dc.subject.naturalRegional economics
dc.subject.naturalTurnover
dc.subject.naturalEconomic survey
dc.subject.naturalIncome Distribution
dc.title.seriesICRIER Working Papers
dc.title.volumeNo. 302
dc.contributor.imprintIndian Council for Research on International Economic Relations
oar.themeAgriculture
oar.themeEconomics
oar.adminregionSouth Asia Region
oar.countryIndia
oar.identifierOAR-010256
oar.authorHoda, Anwarul
oar.authorTerway, Prerna
oar.importTRUE
oar.googlescholar.linkpresenttrue


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