NBR E-JOURNAL, Volume 1, Issue 1 (Jan-Dec 2015) ISSN 2455-0264

IMPACT OF AGRICULTURE CREDIT IN TAMIL NADU – FROM

FARMERS PERSPECTIVE
____________________________________________________________________________
Vinoth Mani. M
Ph. D Scholar, Department of Management Studies, School of Management,
Manonmaniam Sundaranar University, Tirunelveli – 605014, India
Dr. R. Kasilingam
Associate Professor, Department of Management Studies
Pondicherry University, Puducherry-605 014
______________________________________________________________________________
Keeping farmers in the farmland and ensuring them a life with basic needs met has become a
challenge with the rapid urbanization, low income from agriculture, abject poverty, shifting of
government’s focus from agriculture, growth of other employment opportunities and the burden
of doing agriculture. The government has declared agriculture lending under priority sector
lending to ensure money is not the factor that keeps the farmer away from doing agriculture.
Assuming that after crossing all the impediments agriculture credit has finally reached the hands
of farmers the study aims to find whether the credit made the desired impact. The data collected
were quantitatively analyzed by using different SPSS tools. The study classified the impact under
three categories where in the first category the credit has a direct and a minimal impact on the
basic needs of farmer. In the second category Agriculture Credit impacts the number of working
days and food security of the farmers and also helps in facing the basic needs like education,
health. However the second category and the first category of impact suggest that agriculture
credit is yet to play a significant role in agriculture infrastructure development and improving
the overall stature of an agriculturist. The third category recognizes that agriculture credit has
an overall and well distributed contribution to farmers, but only to a minimum number of
populations. The overall finding suggests that institutionalized agriculture credit still gives a
great thrust for farmers to continue farming. The results shows that majority of the farmers are
in the business of doing agriculture only due to government intervention and support. However,
such support is not making them self reliant. The Agriculture credit plays a minimal role and
covers less than one third of farmer helping them build proper agriculture infrastructure and
make investments in machineries.
Key words: Agriculture credit, Impact of Credit

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INTRODUCTION
The need for agriculture credit was seen even during the British era where selective areas
stricken by droughts were brought under institutional credit arrangements. The cooperative
societies act passed in 1904 made cooperatives a premier organization for agriculture credit.
When RBI act was passed in 1935, special provisions were made under section 54 of the act to
start agriculture credit. Since then agriculture credit has become an integral part of Indian
agriculture and the society bounded by it. Every year the agriculture credit target set by the
government was met and in some states the credits disbursed crossed the set targets. Even then
the farmers committing suicide is on rise. Percent of people depending on agriculture and its
allied activities has come down to 56.7 percent (as per 1999-2000 census). The World Bank
estimates that India is one of the highest ranking countries in the world for the number of
children suffering from malnutrition, and the major contributors being rural India. Agriculture
contribution to rural GDP has shrink by one-fourth.
"Rural India, in our view, is no longer an agrarian economy exposed to the vicissitudes of an
erratic monsoon. All agriculture is rural by definition, but the converse is no longer true," And
“In rural India, jobs are switching away from agriculture. In 1978, around 81 per cent of rural
males considered agriculture as their primary job. This ratio fell to 67 per cent in FY05 and 55
per cent in FY10. The trend is similar for female rural employment as well”, said Neelkanth
Mishra and Ravi Shankar, (2012). Noting that increase in productivity and realization of
reasonable price of agri-production is essential for the welfare of rural people, the Finance
minister of India, Arun Jaitley, opined "We should commit to increase irrigation area, improve
efficiency of distinct irrigation scheme, promoting agro-based industries, value addition,
increasing farm income and reasonable prices for farmers produce.", in his first budget speech,
thus emphasizing more on agriculture infrastructure development. However the desired impact
from agriculture was never realized. Capacity building and basic infrastructure is the key to a
sustained agriculture but the needs seem to be less met by the agriculture credit. Even the finance
minister in his yearly budget opined the same. Agriculture credit, a succor given to farmers
during drought time as become an essential commodity, but the impact stays rudimentary,
touching only the bottom. Statistical data reveals various levels of impact; the study helps us
learn from the perspective of farmers and people involved in agriculture activities on whether the
credit has done a justifiable impact on agriculture and the community depending on it.

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LITERATURE REVIEW
Ramesh Golait, (2007) says that the demand for agricultural credit arises due to i) lack of
simultaneity between the realization of income and act of expenditure; ii) lumpiness of
investment in fixed capital formation; and iii) stochastic surges in capital needs and saving that
accompany technological innovations. The first and the foremost point emphasized by Ramesh
Goliat is the realization of income which leads to meeting needs. Without the needs met there is
no actual purpose for anyone to continue the business. And once the basic income needs are met,
people move to the next level. Ramesh Golait, (2007) opined that One of the major impediments
constraining the adoption of new technological practices, land improvements and building up of
irrigation and marketing infrastructure has been the inadequacy of farm investment capital.
Farmers seem to borrow more short-term credit in order to meet input needs to maintain
continuity in agricultural operations without much worrying about long-term capital formation. It
might be the case from supply side that short-term credit bears low credit risk, lower supervision
and monitoring costs, and a better asset liability management. Rakesh Mohan, (2004) said that
heavy dependence on borrowed funds by major agricultural credit purveyors. These have major
implications for agricultural development as also the well being of the farming community. Mr.
Ramesh Goliat and Mr. Rakesh Mohan have seen the missing impact on agriculture credit in
agriculture infrastructure development and growing dependence of farmers on agriculture credit.
Ramesh Goliat has also pointed out that the credits are availed mainly for input needs rather than
capacity building needs. Richard L Meyer, (1990) said that “Production loans from financial
institutions may not contribute much additionality to farm input use and output if, due to
fungibility, they simply substitute for own savings or other sources of loans.” And “Low interest
led to excess demand for loans and the nonprice rationing that occurred often resulted in large
loans to farmers with greater factor endowments, access to better inputs and technical
information, and better management. This gives larger, more powerful farmers a reason to use
their influence to get a larger share of the pie.” The author has thrown a different perspective
believing that loans are availed because it is cheap meaning the loans are not availed looking at
the purpose it require one to serve. Loans are yet another option for rotating money in the
business. Since the cheap loans are available it is invested in agriculture. Things may not be the
same in case the credits are not available. So, agriculture is kept as an option by few farmers
based on the availability of credit. Access to loans and loan size are usually correlated with land

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ownership, particularly in underdeveloped formal financial systems. Therefore, inequalities in

land are often at once the cause and the effect of credit market inequalities, as implied by Carter
and Wiebe. The statement shows that the reach of the credit is biased to certain section of the
society and it can considerably skew the nature of impact. Infrastructure development may be a
high end objective of agriculture credit. The basic need is to increase the income and
productivity. Sreeram (2007) concluded that increased supply and administered pricing of credit
help in the increase in agricultural productivity and the well being of agriculturists as credit is a
sub-component of the total investments made in agriculture. As per the Data of NABARD, The
increased credit flow to agriculture has not resulted in the commensurate increase in production.
The average rate of growth of food grains production decelerated to 1.2 per cent during 1990-
2007, lower than annual rate of growth of population, averaging 1.9 per cent. Mir Kalan Shah,
Humayun Khan, Jehanzeb And Zalakat Khan, (2008) found that if the credit were utilized
properly it has substantial impact on the productivity and income.

RESEARCH OBJECTIVE
The primary objective of the study is to find out the impact of agriculture credit on the livelihood
of farmers in Tamil Nadu

RESEARCH METHODOLOGY
Random sampling technique was used to collect primary data, through carefully structured
questionnaire prepared after an extensive literature review, from farmers in three districts
(Kanyakumari, Thirunelveli and Madurai) of Tamil Nadu. Farmers were sampled based on their
land holding pattern with 82 percent of the farmers belonging to Marginal (53.3 percent) and
Small (28.7 percent) land holding group. 18 percent of the farmers were from Semi-Medium (9.3
percent), Medium (Four percent) and Large (Four percent) land holdings groups. Type of crops
cultivated was also considered to increase the scope of study and farmers spread across eight
different type of crops were brought in. Annual expenditure on agriculture, annual gain on
agriculture, type of loans availed, institutions approached, number of times credit facility is
availed is also considered along with other demographic details such as gender, education and
family type. Exploratory factor analysis is use to group variables into homogenous factors.
Cluster analysis is carried out on the homogenous factors to arrive at heterogeneous clusters with
varying level of contribution from the factors.

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ANALYSIS AND INTERPRETATION

RELIABILITY TEST
According to Thordike, Cunningham, Thorndike & Hagen, (1991), reliability is an important tool
to identify the errors of data and make a data to be fit for future research works. Cronbach’s
alpha is a measure of internal consistency and how close related a set of items are as a group.
Table 1: Reliability test
Cronbach's N of Items
Alpha
.840 10

The alpha coefficient of the ten variables under study is .840, suggesting that the items have high
internal consistency.

DETERMINATION OF FACTORS
Factor analysis is used as a data reduction tool to find out the structure of relations between the
variables. The number of factors to be extracted is determined using principal component
method. The factors with Eigen value greater than one are extracted. The component matrix is
further rotated by using Varimax rotation algorithm. The variance accounted for by the
successive factors are shown in table 2
Table 2: Variance explained by factors
% of Cumulative
S. No Factors Total Variance %
1 Component 1 4.158 41.584 41.584
2 Component 2 1.401 14.008 55.592
3 Component 3 1.079 10.793 66.385

The total variance explained by the three components with Eigen value greater than 1 is 66
percent; remaining 34 percent variance are explained by other variables. The factors are selected
by taking higher factor loadings are specified below

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ROTATED COMPONENT MATRIX

Table 3: Rotated component matrix
Component
1 2 3
Agri. credit improves your social status and overall livelihood .745
Agri. credit makes you sufficient enough .827
Agri. credit helps to cope with and recover from Stress and Shock .705
Agri. credit helps to adapt modern technology .589
Agri. credit increases the number of working days .861
Agri. credit increases food security .833
Agri. credit improved access to modern health facilities .555
Agri. credit improved access to education .720
Agri. credit increased net income .792
Agri. credit increases production .818
Factors contained in component one was named Tertiary Need, component two was named
Secondary Need and component three was named Primary Need.

FREQUENCY ANALYSIS OF IMPACT VARIABLES

For convenience and for better interpretation the five point scale of impacts are classified into
three groups. Number of factors falling under each category and its mean frequencies are shown
in the table 4
Table 4: Frequency analysis of impact variables
3.5 - 5.0 (Positive
Factors and its 1 - 2.5 (No impact) 2.5 - 3.5 (Undecided) impact)
variables
Frequency Percentage Frequency Percentage Frequency Percentage
Primary Need 192 32 46 8 362 60
Impact on Number
of working days 102 34 27 9 171 57
Impact on Food
security 90 30 19 6 191 64

Secondary Need 398 33 126 11 676 56

Impact on access to
modern health
facilities 113 38 32 10 155 52
Impact on improving
access to education 95 32 37 12 168 56

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Impact on net
income 98 33 30 10 172 57
Impact on
production 92 31 27 9 181 60

Teritiary Impact 719 60 93 8 388 32

Impact on adapting
modern technology 178 59 20 7 102 34
Impact on coping up
with shock and stress 167 56 23 8 110 36
Impact on helping
farmers to stop
borrowing further 194 65 25 8 81 27
Impact on overall
status and livelihood 180 60 25 8 95 32

IDENTIFICATION OF FACTORS
PRIMARY NEED
The first factor is labeled as Primary Need. It contains two factors working days and food
security. The variables in Primary Need factor explain the basic requirement that agriculture
credit has to satisfy. It checks whether the agriculture credit keeps the farmer in the farmland, by
measuring the impact on the increase in the number of working days and second it helps to
identify whether the food security, the basic need for a farmer and for any human being is being
satisfied choosing agriculture has an occupation.
Table 5: Primary Need
Si. Factor
No Factors Description of the factor statement Loadings
Number of Working Agriculture credit increases your number of
1 days working days 0.861
2 Food security Agriculture credit increases your food security 0.833

The factor loadings of each variable are presented in the table 5. The frequency table 4 shows
that 57 percent of the farmers accept that agriculture credit has increased the number of working
days and 64 percent of farmers accept that agriculture credit has increased their food security.
Overall agriculture credit plays its role in encouraging farmers to continue with agriculture.

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SECONDARY NEED
The agriculture credit a farmer avails should have an impact on the production and net income.
Though there are many other factors that can influence production such as monsoon, seed
variety, disease control, proper maintenances of the field, timely harvest and other variables,
sufficient agriculture credit at the right time will help farmers avail the factors of production like
labour, seeds, fertilizers, pesticides, electricity and other supporting factors that will impact the
production. Though increase in net income is another variable that can be affected by multiple
sources a cheap and a hassle free agriculture credit will stop the entry of non institutional credit
agencies that sucks a huge margin of farmers income has interest for the loans it provided. Also,
Agriculture credit can stop intermediaries/middleman’s who drain a huge amount of profit from
farmers by purchasing the output at low cost intimidating them on the loans and the interest the
farmers needs to pay. Access to education and modern health facilities are outcome of a
financially strong family. Once they are financially strong their accessibility to modern health
facilities becomes easier than before.
Table 6: Secondary Need
S. Factor
No Factors Description of the factor statement Loadings
1 Production Agriculture credit increases production 0.818
2 Net Income Agriculture credit increases your net income 0.792
Agriculture credit has improved your access to
4 Education 0.72
education
Modern health Agriculture credit has improved your access to
3 0.555
facilities modern health facilities

Frequency analysis table 4 shows that 60 percent of the farmers accept that agriculture credit has
a positive impact on the rise in production. 57 percent of the farmers accept the positive impact
that agriculture credits have on increase in net income. 56 and 52 percent of farmers opined that
agriculture credit has positive impact on access to education and in improving production
respectively. Agriculture credit overall has a positive impact on all the variables in the factor
“Secondary Need”

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TERTIARY NEED
Overall improvement in livelihood, Impact of self sustainability, Impact on ability to meet shock
and stress and impact on adapting modern technology are the factors under Tertiary Need. Once
the primary and secondary needs of a farmer are met and once they settle down on agriculture as
their main livelihood the need to build proper infrastructure and capacity building arise. Only for
whom the fundamentals are strong can go on to build such infrastructure. When there is a
positive Tertiary Need due to agriculture credit it means a farmer has become self reliable, he/she
can faces all the stress and shocks in agriculture and his overall livelihood has improved. The
farmer’s ability to meet shock and stress comes with financial stability. Crop insurance, Crop
failure relief fund and credit written off can play a role, but it all comes after the damage is done.
The variable aims to study whether an unprecedented event can be faced by a farmer only with
the help of the credit he/she has already availed.
The most important feature of any credit should be to make a person succeed and make him stop
relying on credit every time he/she starts up. In simple words it should help the borrower self
sufficient, self reliable and self sustainable over a period of time. A farmer should not be looking
for subsidized credit all the time for the overall benefit of the economy, as the subsidized credit
imposes a great burden in the fiscal. After five decades of receiving credit a farmer still looks for
credit. The situation changes when there is an overall impact.
Table 7: Tertiary Need
S. Factor
No Factors Description of the factor statement Loadings

Stops availing it Once availing agriculture credit makes you

1 sufficient enough to stop you avail agriculture credit 0.827
again
again and again
Social status and Your overall status and livelihood improved with the
2 0.745
livelihood utilization of agriculture credit
To cope with stress Agriculture credit helps you to cope up with and
3 0.705
and shock recover from stress and shocks
Adapt modern You can adapt modern technology with the help of
4 0.589
technology agriculture credit

The frequency table 4 shows that 65 percent of the farmers are in need of subsidized agriculture
credit continuously and their need for the loan has not diminished. 59 percent of farmers said that
they were not able to adopt modern technology in farming with the help of agriculture credit. 56

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percent of farmers believe that agriculture credit is not helping them to cope up with the shock
and stress resulting from crop failure or bad harvest. A question whether the social status and
livelihood improved got 60 percent negative response where the farmers perceive that their
livelihood has not changes even after the credit requirements for agriculture was met by
institutional credit.

SEGMENTATION OF THE DEGREE OF IMPACT

The degree of impact, agriculture credit has on farmers, are segmented by using K-means cluster
algorithm. The procedure attempts to analyze the homogenous group of needs in to three
different categories as shown in table 8. The mean value of each cluster which explains the
characteristics of each cluster
Table 8: Final cluster centers and ANOVA table
Factors Cluster
1 2 3 F Sig
Primary Need 2.08 (III) 4.0 (I) 3.97 (I) 417.326 0.000
Secondary Need 2.62 (II) 3.31 (II) 3.95 (I) 91.599 0.000
Tertiary Need 2.06 (III) 2.24 (III) 3.74 (I) 238.743 0.000
Mean 2.25 3.18 3.89
No. of cases in each cluster 99.00 108.00 93.00
Total Percentage 33 36 31

The ANOVA table indicates that Mean values of three clusters are significantly different. Here
Primary Need is the factor with higher F value. This shows that this factor contributes more on
discriminating the three degree of impact. The significant value of all the three factors is 0.000
which indicates that these three factors are contributing more on dividing the level of impact
based on their variables the agriculture credit impacts in a farmer’s life. 36 percent of the farmers
are in cluster 2 where the impact on Primary Need is more and the Secondary Need is moderate
with no impact of agriculture credit on the tertiary part. 33 percent of the farmers are in cluster 2
where the impact on Secondary Need is moderate and impact on primary and Tertiary Need by
agriculture credit is less significant. 31 percent of farmers are in cluster three where all the three
levels of impact are high.

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CLUSTER CLASSIFICATION ON THE DEGREE OF IMPACT

SUBTLE IMPACT
The first category impact or the Subtle Impact suggests that even if agriculture credit doesn’t
increases the living standards of the farmers overnight it provides the basic sustenance to
maintain status quo. Though the outcomes may not be encouraging the impact of agriculture
credit in this scenario would not be overly discouraging. The farmers who may be in the verge of
moving out from regular agriculture, but not sure what to be done and if they couldn’t identify an
alternative job or source of income the credit extended by institutions will keep them doing
agriculture. Here the agriculture is done because the credit has been extended. The role of
agriculture credit in this scenario is to keep farmers in their business. Farmers see a moderate
impact of the credit in production and net income which keeps them afloat. Also, the major
impetus is the help done in supporting children’s education and improving access to health
facilities. Tertiary Need being impacted less in this case is acceptable as it is considered more as
a highest level of impact, but the less influence on primary need might raise eyebrows asking us
what keeps farmers afloat when their food security itself is not met. In that case let us not
overlook the fact that 58 percent of the farmers engage in activities other than agriculture. 72
percent of farmers have annual other income of Rs 50, 000/ to Rs. 1.00 Lakh. In 70.7 percent of
the households at least one family member is engaged in economic activities other than
agriculture. MNREGAs and Public distribution scheme also ensure minimum sustenance and
food security.
It shows that agriculture credit availability alone has become a sole reason for farmers to do
agriculture. In the absence of institutionalized credit and governments support 33 percent of the
farmers who sees a Subtle ‘Status Quo’ impact would have already left agriculture.

BASIC IMPACT
The “Basic Impact” has an attribute of a strong influence of agriculture credit on Primary Need,
a moderate influence on Secondary Need and weak influence on Tertiary Need. 36 percent of the
respondents belong to this group where they see a great impact of agriculture credit on the
primary requirements like ensuring food security and increasing number of working days. From
the day banks were directed by the government to take care of the primary needs of farmers the

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credit infused inside the system has played a significant role in increasing the net income and
production by sidelining middlemen’s, usurers and other non institutional lenders. But, only to
those who had the patience to avail the credit from government institutions after crossing all the
impediments and without falling prey to the non institutional lenders. The impact on Education
and health facility has other contributing factors where government is taking steps to take
education to everyone. Agriculture credit alone cannot be taken as a single common denominator
in making education and medical facilities reach the public and the farmers, however it has a role
to play and the farmers firmly believe that it has done its role. Influence on Tertiary Need is less
in the cluster. Thus the cluster believes that agriculture credit can play a pivot in ensuring
farmers achieve their basic needs but capacity building and making farmers self reliable still
stays as a distant dream.

CORE IMPACT
When the agriculture credit does it job in all directions not leaving any part untouched it is
understood that the credit has done justification. Giving room for development, Agriculture
credit has touched all levels of farmers, from marginal to large land holders. 31 percent farmers
believe that Agriculture Credit has played its role in each and every variable that contributes to
all the three factors (primary, secondary and Tertiary Need). They feel that agriculture credit is
focused on the right direction. A high impact of agriculture credit on primary, secondary and
Tertiary Need means that farmers are making use of the government schemes properly. When
core impact is done then it becomes essentially the real focus group of agriculture credit. Further
research should focus on extracting the demography and characters of this group and identify
how agriculture credit was utilized by them. This will help in credit optimization which in turn
will lead India into the second phase of ‘Farming with Agriculture credit’.

RELIABILITY OF CLUSTER CLASSIFICATIONS

Discriminant analysis is a statistical tool to test reliability of classification of cluster. It is also
used to determine the most prudent way to distinguish between groups. For that purpose the three
factors (Primary, Secondary and Tertiary Need) are taken as predictors and the three categories
of degree of impact are taken as grouping variables

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Table 9: Eigen Values

Eigen Cumulative Canonical
Function % of Variance
value % Correlation
a
1 3.659 78.8 78.8 .886
a
2 .985 21.2 100.0 .704
Table 9 contains the Eigen values of the two discriminant factors and also its canonical
correlation. Function 1 has larger Eigen value. It accounts for more amount of variance
distributed the linear combination of variables. Function one has Eigen value greater than unity.
This means that function one contributes good variability between two functions. The co-
efficient of canonical correlation is also high for function one. This signifies that there exists a
strong relation between two functions and three factors.

Table 10: Structure Matrix

Function
1 2
Primary Need .834* -.518
Secondary Need .401* .173
Tertiary Need .517 .800*

The structure matrix table 10 shows within group correlations of each independent variable with
the canonical function. The strongest correlation of the Primary Need with function one is 0.834
and for Secondary Need is .401. The strongest correlation for Teritary impact with Function two
is .800.
Z1= .834* Primary Need, Z2 = .401*Secondary Need and Z3 = .800* Tertiary Need
These two functions are significant discriminant functions which will explain the characteristics
of investors.

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Figure 1: Cluster classification of Impact variables

Figure 1 explains how well the clusters are distinctive with one another. The centroids of all the
three clusters are distinctive and have different mean values. Further the clusters are aligned
separately from other groups.
ASSOCIATION BETWEEN DEMOGRAPHIC VARIABLES AND DEGREE OF
IMPACT
Pearson Chi Square test is used to find the relationship between demographic variables,
agriculture profile of the farmers and the Degree of Impact.
Table 11: Pearson Chi Square test
Pearson Chi - Square
Degree of Impact Vs Demographic
Si.No Asymp. Sig. (2
Variables (Mentioned below) Value df
- Sided)
1 Family Type 9.765 2 0.008
2 Prominent cultivated crops 33.928 14 0.002
3 Time of selling the output 18.726 8 0.016
4 Source of hand loans 13.154 6 0.041
5 Securities preferred by banks 12.812 6 0.046
6 Source of hand loans 14.128 6 0.028
7 Distance b/w house and credit institution 13.192 6 0.040
Percent utilization of agriculture credit for
8 18.752 6 0.005
other activities

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The above table shows a significant level of correlation between the demographic variables and
degree of impact.
Chart 1 represents the three clusters where the level of impacts was categorized into three
groups. The Subtle Impact group suggests that there is no impact of agriculture credit on the
primary and tertiary needs of the farmer. In the group only the secondary need was subtly
affected by the presence of agriculture credit. Since there is no impact on the primary and tertiary
need and only a minimal impact on the tertiary needs it is ascertained that agriculture credit has
no impact on the overall livelihood of farmers under this group. This suggests that agriculture
credit is just used as a fillip and once the credit is removed there will be a reversal in status quo
leaving a huge vacuum on the livelihood of farmers. Also, such credit is of no use as it plays role
no significant role in capacity building and making farmers self reliant. 33 percent of the farmers
see only the subtle impact of agriculture credit.
Chart 1: Degree of need in various impacts

Basic impact suggests only the primary and secondary needs are satisfied by agriculture credit
for the farmers in this group. 36 percent or the majority of the farmers are in this group. The
secondary needs have only a minimal impact and there is no impact on Tertiary Need. Again,
such impact gives reasons for them to stay in agriculture industry. Unlike the group under Subtle
Impact this group doesn’t do agriculture only because they get credit facility, but for the reason
that they get a moderate living out of agriculture. However they are once again not a self reliant
group or the group that feels that agriculture credit can improve their standards of living. They
also lack capacity building and any stress and shock or a crop or monsoon failure can push them
into Subtle impact group. The farmers under both this group i.e 69 percent of the farmers were

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completely depended on agriculture not because they have well established themselves in this
field or because they believe they can make a good livelihood of agriculture. The two groups do
agriculture for the following reasons i. The personal sentiment attached to agriculture; ii.
Agriculture is their only source of income; iii. They couldn’t find an alternate job or source of
income iv. Agriculture is not their major source of earning; v. They have other alternate source
of earning; vi. Agriculture credit makes the job viable and helps them keep going vii. Waiting for
the right time to leave agriculture; viii. Government policies keep encouraging them to do
agriculture or; ix. Common belief that the situation might change in their favor; Apart from these
reasons other food security schemes, health schemes and job guarantee scheme impact their
livelihood so that the harsh realities faced through agriculture is subsidized though not nullified.
The third group is the Core Impact group where all their needs were satisfied by agriculture
credit. They are the positive and successful face of Basic impact group, like Subtle Impact group
being the negative side of Basic impact group. Proper, complete and right usage of credit, saving
habit and prudent investment are the reasons for the existence of the group. Political, social and
financial clout enjoyed by this group, mainly the medium and large land holding farmers, cannot
be overlooked. Impact of agriculture credit on the tertiary need is felt only in this group. 31
percent of the farmers belong in this group. The Core Impact group sees maximum impact of
agriculture credit on all the three needs.
Chart 2: Level of impact on various needs

100%
90%
80%
70%
60% No Impact
50% Minimal Impact
40%
High Impact
30%
20%
10%
0%
Primary Need Secondary Teritiary Need
Need

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It is evident from Chart 2 that agriculture credit has a very high impact on meeting the primary
needs of the farmer i.e ensuring food security and increasing the number of working days.
Majority of the agriculture credit has no impact on the tertiary needs of the farmers i.e making
them self reliant, helping them adapt modern technology, protecting them from stress and shock
and improve their overall livelihood. Only a moderate impact is seen on the secondary needs
such as increasing net income, productivity and access to education and medical facilities. The
study implies that 69 percent of the credit is not making impact on the livelihood of farmers and
on agriculture industry. A lot has to be done on capacity building and agriculture infrastructure
development. Long term credit facilities are availed by 3.7 percent of the farmers in the entire
group and only 29.3 percent are availing medium term loans. 67 percent of the farmers are still
reliant on short term loans use to purchase basic agriculture inputs.
From a socialistic perspective we could suggest the continuous availability of agriculture credit
to farmers is essential to help them meet their basic needs in life or we can encourage farmer’s
cooperative with profit sharing motive to focus more on medium and long term loans to develop
the infrastructure and move to the next level.
From a capitalistic perspective the loans given to 69 percent of the farmers are not making huge
differences even after centuries. Thus agriculture credit should be gradually weaned out of the
system for better utilization of capital resources and to meet the labour shortage in other
industries. Only small, medium and large scale holding are to be focused more and they should
be encouraged to avail more medium and long term loans at low interest rate. Subsistence
agriculture cannot be useful for India in the days to come and the focus should be more on
extensive agriculture with emphasis on basic agriculture infrastructure development, adaptation
of modern machinery, human resource development and capacity building.

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