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Nature and Dimensions of Farmers’ Indebtedness in India

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  • Rajeev, Meenakshi
  • Vani, B P
  • Bhattacharjee, Manojit

Abstract

This paper examines nature and extent of farmers’ indebtedness in India using unit record data from NSSO 59th round, and provided a comparative picture of major Indian states. It shows using data from rice cultivating farmers that productivity of small farmers is not only higher than the medium farmers, it increases with access to credit. In terms of access to credit, seen through extent of indebtedness, Karnataka is better placed than many Indian states. But Andhra Pradesh, Tamil Nadu, Punjab and Kerala lie ahead of Karnataka. Ironically however, almost half of the credit is still provided by the informal sector in the state of Karnataka (on an average). Region wise picture shows that Southern region is more dependent on informal sources of credit. Poor farmers with lower land holdings are much more deprived of the formal sources of credit than the comparatively richer ones. Thus they also pay a much higher rate of interest with modal value of 36%. But it is heartening to note that loans are taken mostly for income generating purposes. It also indirectly implies that even for the income generating purposes poor are not getting access to formal sources of credit.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42358.

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Date of creation: 31 Oct 2012
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Handle: RePEc:pra:mprapa:42358

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Keywords: Incidence of indebtedness; productivity analysis; formal sector credit; indebted households;

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  1. Manojit Bhattacharjee & Meenakshi Rajeev, 2010. "Interest rate formation in informal credit markets in India: does level of development matter?," Brooks World Poverty Institute Working Paper Series 12610, BWPI, The University of Manchester.
  2. Gupta, Manash Ranjan & Chaudhuri, Sarbajit, 1997. "Formal Credit, Corruption and the Informal Credit Market in Agriculture: A Theoretical Analysis," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(254), pages 331-43, May.
  3. Lele, Uma, 1981. "Co-operatives and the poor: A comparative perspective," World Development, Elsevier, Elsevier, vol. 9(1), pages 55-72, January.
  4. Bell, Clive, 1990. "Interactions between Institutional and Informal Credit Agencies in Rural India," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(3), pages 297-327, September.
  5. Siamwalla, Ammar, et al, 1990. "The Thai Rural Credit System: Public Subsidies, Private Information, and Segmented Markets," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(3), pages 271-95, September.
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