TY - JOUR
T1 - Institutional versus non-institutional credit to agricultural households in India
T2 - Evidence on impact from a national farmers’ survey
AU - Kumar, Anjani
AU - Mishra, Ashok
AU - Saroj, Sunil
AU - Joshi, P. K.
N1 - Publisher Copyright:
© 2017 Elsevier B.V.
PY - 2017/9
Y1 - 2017/9
N2 - A goal of agricultural policy in India has been to reduce farmers’ dependence on informal credit. To that end, recent initiatives are focused explicitly on rural areas and have a positive impact on the flow of agricultural credit. Despite the significance of the above initiatives in enhancing the flow of institutional credit to agriculture, the links between institutional credit and net farm income and consumption expenditures in India are not very well documented. Using large, national farm household level data and IV 2SLS estimation methods, we investigate the role of institutional farm credit on farm income and farm household consumption expenditures. Findings show that, in India, formal credit does indeed play a critical role in increasing both net farm income and per capita monthly household expenditures of Indian farm families. Finally, we find that, in the presence of formal credit, social safety net programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) may have unintended consequences. In particular, MGNREGA reduces both net farm income and per capita monthly household consumption expenditures. On the other hand, in the presence of formal credit, the Public Distribution System may increase both net farm income and per capita monthly household consumption expenditures.
AB - A goal of agricultural policy in India has been to reduce farmers’ dependence on informal credit. To that end, recent initiatives are focused explicitly on rural areas and have a positive impact on the flow of agricultural credit. Despite the significance of the above initiatives in enhancing the flow of institutional credit to agriculture, the links between institutional credit and net farm income and consumption expenditures in India are not very well documented. Using large, national farm household level data and IV 2SLS estimation methods, we investigate the role of institutional farm credit on farm income and farm household consumption expenditures. Findings show that, in India, formal credit does indeed play a critical role in increasing both net farm income and per capita monthly household expenditures of Indian farm families. Finally, we find that, in the presence of formal credit, social safety net programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) may have unintended consequences. In particular, MGNREGA reduces both net farm income and per capita monthly household consumption expenditures. On the other hand, in the presence of formal credit, the Public Distribution System may increase both net farm income and per capita monthly household consumption expenditures.
KW - 2SLS
KW - Consumption expenditures
KW - Institutional credit
KW - Instrumental variable
KW - Net farm income
KW - Social safety net
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U2 - 10.1016/j.ecosys.2016.10.005
DO - 10.1016/j.ecosys.2016.10.005
M3 - Article
AN - SCOPUS:85021240734
SN - 0939-3625
VL - 41
SP - 420
EP - 432
JO - Economic Systems
JF - Economic Systems
IS - 3
ER -