Dynamic effects of digital credit on agricultural investment and production: Experimental evidence from India

Digital credit has emerged as a promising tool for addressing liquidity constraints among smallholder farmers, yet evidence on its longer-term effects on agricultural investment and production remains limited. This paper examines how access to digital agricultural credit shapes farmers’ investment decision and production outcomes over time using a two-phase cluster randomized intervention implemented in Odisha, India. We combine difference-in-differences, and staggered treatment estimators to assess how impacts evolve over years. We found limited evidence of immediate increases in aggregate agricultural input expenditure and durable asset accumulation. In contrast, we find robust evidence of positive effects on agricultural production among existing producers. Taken together, the findings indicate that digital credit primarily operates by relaxing liquidity constraints and improving the productivity of existing farming operations rather than inducing new entry into agriculture or triggering immediate capital deepening. The results highlight the importance of distinguishing between short-run and long-run responses to financial interventions and suggest that agricultural investment is dynamic nature and can take time to materialize.