Access to Rural Credit and Input Use: An Empirical Study

This paper has empirically examined the relative access of different categories of farm households to formal credit and its impact on fertiliser-use. The study has brought out that inequalities in the distribution of number of loans vis-à-vis operational holdings have increased over time. The bias that existed during 1990s in favour of marginal and small farmers obtaining proportionately higher share of credit compared to their share in area operated, had vanished by 2001–02. The distribution of credit during 2006–07 marked the return of such a positive bias to some extent. The proportion of borrowing households in the total households increased during 2006–07 with maximum gains for large farmers. Efforts should be made to consolidate the gains obtained by marginal farmers in terms of better access in 2006–07. Fertiliser consumption across states could be explained by credit levels, irrigation availability, share of short-term credit and farm-size. Higher credit levels are associated with higher fertiliser consumption levels, as revealed by cross-section data across the states and farm-size classes during 2006–07. Across states, marginal farmers, on an average, could increase fertiliser-use by 0.381 kg with every 100 of credit they received. The response was stronger on large farmers. The elasticity of fertiliser-use w.r.t. credit has been found between 0.20 and 0.24 on marginal and small farms, and between 0.52 and 0.54 on medium and large farms.