Institutional credit flow in north eastern region: Issues and solutions

In every Union Budget, the agriculture credit target is being raised and surpassed subsequently. Since long, credit accessibility has been a major issue of Indian agriculture, predominantly identified by large presence of small and marginal farmers (86%) due to shrinking landholding size caused by population explosion. The credit intensity (ratio of agriculture credit to agriculture output value) has been rising as a consequence of continuous effort of improving credit accessibility. Though the volume of credit has been increasing over the decades, its quality, reach and impact on agriculture has not improved much while regional and inter-state disparity is wide and sharp in the country. Because of wide presence of traditional farming like Jhum cultivation, NER ingested the least institutional credit for agriculture. The region is trapped in a vicious circle where one disadvantage generates another that keep the region agriculturally underdeveloped and remain deficient in institutional credit. There is a wide difference among NE states as far as infrastructure, credit stream, industrialisation, and other financial and non-financial parameters are taken under consideration.Among the regions, Southern region (10.68%) has the highest growth for crop loan and NER (36.15%) reported the highest growth for term loan. However, crop loan contracted by 2.44 per cent in NER during 2013–14 to 2019–20. The highest share of total credit of the country goes to Southern region in both 2013–14 (40.46%) and 2019–20 (43.95%) whereas NER has negligible share in both the periods (0.60% and 0.85%, respectively).Out of total Ground Level Credit (GLC) flow in NER, 65.31 per cent share was received by Assam alone in 2019–20. In addition, Assam's GSA as percentage of total Geographical Area stands as 51.8 per cent in 2019 as compared to national average of 37.7 per cent while Arunachal Pradesh has just 2.9 per cent. The credit- deposit ratio of Assam is also higher than the regional average of NER. This paper looks at the credit scenario in NER and tries to identity the major constraints in credit flow and solutions thereof.