Journal of Agricultural Development and Policy

The study is based on primary data collected from 150 households in rural Punjab during 2021-22. Farm households were categorized by the incidence of indebtedness levels, revealing that over half of Punjab carry a substantial debt burden. Commercial banks emerge as crucial sources of credit, particularly for larger farmers. The analysis establishes a positive link between debt and investments in fixed capital assets, emphasizing that higher debt categories align with increased investments. Notably, financially stable farmers without debts allocate resources similarly to those with medium to high debt. Expenditure patterns in crop production underscore that rising debt levels prompt increased spending on essential aspects, even among farmers with no debts, showcasing their financial stability. Examining the relationship between income and indebtedness, the study found that higher debt levels correspond to increased farm and family income. The debt-to-income ratio is found to be inversely related to landholding size. This research provides insights into how factors such as agricultural debt, investment, and income are interconnected. The findings have implications not only for individual farming households but also for the broader agricultural community.