Dynamics of agricultural credit flow in the pre and post reform period in India
Partha Sarathi Aich
Agriculture is the lifeline of majority of the people in India. It accounts for about 19 percent of GDP and about two thirds of population is dependent on the sector. In view of this importance the Government and Reserve Bank of India (RBI) have played a important role in setting up a broad based institutional framework for catering to the credit requirements of this sector. The policymakers over the past years increased the institutional sources of credit but neglected the qualitative aspect of credit delivery system. Agricultural growth in terms of major crops has witnessed a deceleration despite jump in quantity of credit delivery. The major challenge of the policy makers is to reverse the trend of deceleration in agricultural growth. Such a deceleration is directly associated with the declining of public investment in R&D, fragmentation of holdings, lack of infrastructure, obsolete technology and improper input pricing policies of the government. Hence the crisis of agricultural stagnation needs urgent attention and rigorous treatment on the part of planners and policy makers. Given this macro scenario, the study attempts to analyse the trend and growth of flow of credit to agriculture both in pre and post reform period. The study based on secondary sources of data compile from several sources and these data revealed that structure of credit outlets has witnessed a significant change and commercial banks have emerged as the major source of institutional credit to agriculture sector in the recent past few years. But the declining share of investment credit in total credit may constrain the growth of agriculture in India. This alarming situation calls for serious efforts to augment the flow of credit to agriculture.