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Class–Caste Differences in Access to Agricultural Credit in India
Looking at the class and caste differences in access to agricultural credit in India, it is seen that large proportions of farmers are still outside the fold of formal credit. Farmers from smaller farm-size class and socially marginalised castes face difficulty in accessing credit due to lower asset valuations, compounded by social discrimination. There is a need for asset creation and reorientation of the present agricultural credit policy for greater inclusiveness.
The author is thankful to an anonymous referee of this journal for the valuable comments on an earlier draft of this article.
Credit is an important mediating input for agriculture to improve productivity. Strengthening formal credit is one of the important tools in the target set by the Government of India (GoI) in 2016 to double farmers’ incomes by 2022. The Union Budget 2017–18 announced a credit target of `10 lakh crore and 60 days of interest waiver on farmers’ loans from the cooperative credit structure (GoI 2017). The ratio of agricultural credit to agricultural gross domestic product (GDP) has increased from 10% in 1999–2000 to around 38% by 2012–13 (GoI 2016). The provision of credit is of vital importance in achieving social mobility for the population engaged in agriculture (Dantwala 1952). In India, around 86.4% of farmers are in the smaller farm-size category (≤ 2 hectare) and majority of them are from socially marginalised castes (NSSO 2014). While access to formal credit for the agricultural sector is crucial for its growth, the issue of inclusiveness in terms of class and caste in access to credit is also important.
Many studies clearly established the positive relation between easy access to credit by farmers and agricultural productivity in India (Binswanger and Khandker 1992; Das et al 2009; Bhalla and Singh 2010). Credit could enable a farmer to move on to a superior production frontier, so that at given level of inputs the farmer is able to produce more output (Narayanan 2015). Formal credit can be used to maximise the yield at a given level of capital stock. It can be used for building up capital stock—irrigation facilities, machines, and so on—and to replace informal credit associated with high interest burden.
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