Financial Inclusion Through Kisan Credit Cards in Arunachal Pradesh—The Truth Behind Aggregating Numbers

Arunachal Pradesh, though strategically very imperative, is one of the utmost backward states in India in the traditional wisdom of economic constraints. The extensive inaccessibility and separation from the main stream of the country postured daunting problems to the efforts of socioeconomic improvement of the state. This chapter studies the question of convergence in Arunachal Pradesh agriculture since the last decade. It focuses on the problems of (a) whether there has been a catching-up propensity (β-convergence) of slow-growing districts with fast-growing ones; and (b) whether there has been a propensity towards convergence (σ-convergence) in agricultural productivity during 2000–2010 over a representative cross section of Arunachal Pradesh districts. The chapter also examines the process of Galton’s fallacy through growth-terminal level regressions for robustness of the results. The propensity of low-KCC concentration districts to catch up with high-KCC concentration districts is examined through the unconditional β-convergence approach, and the operation of Galton’s fallacy through growth-terminal agricultural productivity-level regressions. The shrinking of variance in productivity levels is tested by using the σ-convergence approach and the robustness of the results is tested by using alternative test statistics. The results suggest that comparatively agriculturally poor districts, if not all, have been able to catch up with the agriculturally rich districts, demonstrating β-convergence. Although the growth of KCC loans varied across the districts, the average speed of convergence remained more or less equal during both the periods. However, inter-district differences in growths of KCC loans have significantly declined in the state indicating σ-convergence. Neither did the low (agriculture) productivity districts grow faster, nor did the high (agriculture) productivity districts grow slower to demonstrate the catching-up or β-convergence process. These tendencies are likely to continue in Arunachal Pradesh agriculture unless adequate investments or technological interventions are made to enhance agriculture productivity. This would furthermore help in credit deepening and credit widening (both horizontal and vertical financial inclusion) through KCC loans, leading to a further convergence. State governments and banks should create enabling environment that can improve credit absorption capacity of farmers and geographical areas, accelerate flow of credit and loan recovery simultaneously.