A STUDY OF 'INSTITUTIONAL CREDIT TO SMALL …
Transcript of A STUDY OF 'INSTITUTIONAL CREDIT TO SMALL …
A STUDY OF 'INSTITUTIONAL CREDIT TO SMALL BORROWERS IN SELECTED RURAL AREAS OF TAMIL NADU
V.MOHANASUNDARAM
INSTITUTE FOR SOCIAL AND ECONOMIC CHANGE BANGALORE
,_.
~-. '~-::.'
,/ '--
c; q I/':,-S ":', '
rs, I:). '<lit', _,, .... " r ;, .---; .... :
. !. . .
THESIS SUBMITTED TO BANGALORE UNIVERSITY FOR THE DEGREE OF
DOCTOR OF PHlLOSOPHY IN ECONOMlCS THROUGH 1 HE DEPARTMENT OF ECONOMICS, BANGALORE UNIVERSITY
BANGALORE
1993
CERTIFICATE
I certify that I have guided the preparation
and writing of the present thesis entitled "A Study of
Institutional Credit to Small Borro~arS in Splp~tpd
Rural Areas of Tamil Nadu" by Mr V Mohanasundaram who
worked on the subject at the Institute for Social and
Economic Change, 8angalore.
,r;;~\v",~",\ (M PRAHLADACHARl
Professor and Head Rural Economics Unit
Institute for Social and Economic Change 8ANGALORE
DECLARATION
I declare that the thesis entitled "A Study of
Institutional Credit to Small Borrowers in Selected
Rural Areas of Tamil Nadu" is a result of my own work
carried out at the Institute for Social and Economic
change, Bangalore and that it has not, either wholly or
in part, been submitted for any other Degree or Diploma.
Due acknowledgements have been made wherever anything
has been borrowed from other sources.
(V MOHANASUNDARAMl
ACKNOWLEDGEMENTS
I deem it my duty to acknowledge the help I
have received from many people during the course of my
research work.
At the outset, I gratefully acknowledge the
constant encouragement, able guidance,
comments, adept and meticulous corrections and
incisive
academic
acumen of my research guide Dr M PRAHLADACHAR, Professor
and Head, Rural Economics Unit, Institute for Social and
Economic Change (ISEC), Bangalore, WhiCh helped me to
carry out the research work successfully. His goodwill,
bounteous wishes and cordial relationship towards me are
highly instrumental in the accomplishment of the thesis.
I sincerely and wholeheartedly thank him for all the
help and cooperation that I have received from him
during the course of my study.
I thank Dr V M Rao, presently Member,
Commission for Agricultural Costs and Prices, New Delhi,
who initially helped me to select the research topic and
also to complete the pre-Ph D Course.
I remember with gratitude the inspiration I
got from the encouraging words of late Prof. V K R V Rao,
the Founder Director and Chairman of 1 SEC, and
late Dr L S Venkataramanan, former Director, ISEC. I
pay my tributes to them.
1 thank the lSEC authorities for providing me
the fellowship and other facilities to pursue my
Doctoral research.
1 sincerely acknowledge the help,
encouragement and comments 1 received from Dr Abdul
Aziz, Professor and Head, Economics Unit, ISEC.
I am highly indebted to Dr P Hanumantha
Rayappa, Dr M V Nadkarni, Dr A S Seetharamu, Dr Amal
Ray, Dr B S Bhargava, Dr H G Hanumappa, Dr C S Nagaraju,
Dr M Venkata Reddy, Dr S N Sangita, Dr (Mrs) Hemlata Rao
and all other faculty members, Research Analysts and
Technical Staff of ISEC for their sugggestions, help and
encouragement.
I am highly grateful to the Library staff,
Administrative staff, Estate Office and Mess staff of
ISEC for their kind and affectionate help and support
extended towards me for no return. But for their co-
operation and support my research work and stay at
would not have been a pleasant one.
ISEC
I thank Prof S N Nanje Gowda, Dr 0 T NanjR
Gowda, Dr R G Desai and other Faculty Members,
Department of Economics, Bangalore University for all
the help and cooperation in getting me registration and
extending help towards the submission of my thesis.
The incessant encouragement I have received
from my well-wishers Dr C Ramasamy, Dr L P Swaminathan,
and Dr K Palanisamy of Tami 1 Nadu Agricultural
University, COimbatore; Dr K Ramamoorthy, Scientist,
Central Cotton Research Institute, Coimbatore; Rev. Fr.
Sebastian, Founder President, Association of Economists,
Tami 1 Nadu; Dr C Thangamuthu, Professor and Head,
Department of Economics, Bharathidasan Univer6ity,
Trichy; Dr P Arumugam, Department of Economics,
Bharathiar University, Coimbatore; Dr R S Deshpande,
Gokhale Institute of Politics and Economics, Pune;
Dr (Mrs) L Jayalakshmi, Principal, G V G College,
Udumalpet and Smt. Susheela Subramanya, Editor, Southern
Economist, Bangalore, has helped me in many ways to ,
improve the thesis work. I am thankful to all of them.
lowe a great deal to Dr W Earnest William,
Professor and Head, Prof K Durairaj and other colleagues
at my Department of Economics, PSG College of Arts
and Science, Coimbatore for their concern and constant
encouragement •
•
I take this opportunity to thank
Dr Chidambaram, former Director, Mr Mohanarangan and
other staff members of Department of Evaluation and
Applied Research, Madras, for making available not only
the necessary data but also their suggestions to improve
the present work. My thanks are also due to Department
of Institutional Finance, Madras; Lead Bank Department,
Indian Overseas Bank, Madras; DRDA Office, Coimbatore;
Lead Bank Office, Canara Bank, COimbatore; the selected
Block Offices, Bank Branches, MPCSs, ASCSs, VLWs, VEWs,
selected beneficiary and non-beneficiary respondents and
all others for their cooperation while collecting the
necessary data for the present study.
I rec all with gratitude the hospitality I
received from my friend Manoharan, Mr Ratnam,
Mrs Shanthamani Ratnam, and Ms Rajalakshmi when I was in
Bangalore and Mr Balasubramanian, Mr Palanisamy Gounder
and Mrs Meenakshi Ammal during the time of field work.
I sincerely believe that it is my interaction
and association with my friends Jose, Ravichandran,
Iyyampillai, Selvaraju, Shylendra, Rajendran, Deshpande,
Thangaraj, Sekhar, Govindaru, Rajasekaran, Joseph,
Itagi, Muthurayappa, Thippaiah, Veerasekharappa,
Paramashivamurthy and others, both during my stay at
ISEC and thereafter, that have helped me to put up with
the pains and pleasures of the thesis work. I value
their friendship and hold them all in great esteem. I
cherish gratefully the succour extended towards me by my
junior, Viswanath at ISEC during the final stage of my
work.
1 thank Mr Narayana, Mr Shankar and Mr Boopathy
for their typing work. But for the strenuous and
untiring efforts of Mr Narayana in word-processing, the
work would not have been completed on time.
thank him.
1 specially
All words will fail to adequately express my
gratitude and
grand-mother
encouragement.
indebtedness to my beloved parents and
for their love, affection and
The sacrifice made at the homestead by
my brothers Sivanandam and Sachidanandam and gister
Vasantha Kokilam helped me in devoting myself to the
work. My wife's keen interest in my studies and my
charming daughter are the source of lnspiration to me
during the crucial stage of submission of the Thesis.
Lastly, 1 am extremely grateful to my grand-
father, late Sri S Velappa Gounder, an innovativ~ farmer
in a remote village, who has encouraged and financed my
higher studies, but not fortunate enough to see the
fruition. 1 DEDICATE this work as an honour to his
memory.
(V MOHANASUNDARAM)
CONTENTS
ACI<NOWLEDGEMENTS
LIST OF TABLES
LIST OF FIGURES
Chapter
I
II
III
IV
V
VI
VII
INTRODUCTION
REVIEW OF LITERATURE
THE STRUCTURE AND GROWTH OF RURAL INSTITUTIONAL CREDIT IN INDIA
METHODOLOGY
RETURNS TO INVESTMENT IN DAIRY SCHEME
RETURNS TO INVESTMENT IN MINOR IRRIGATION SCHEMES
FINANCIAL VIABILITY ANALYSIS
Page
1
18
82
130
163
218
267
VIII SUMMARY OF FINDINGS AND CONCLUSIONS 296
APPENDICES 337
B IBL IDGRAPHV 352
Table
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
LI8T OF TABLES
Sources of Rural Credit
The Performance of PACS in India
Distribution of Loans and Advances Issued by PACS According to Category of Borrowers - All India and Tamil Nadu
Advances by Primary Land Mortgage/Development Banks in India
Classification of Loans Issued by PLDBs According to Size of Ownership Holdings - All India and Tamil Nadu
Number, membership, paid-up loans advanced, outstanding and of Co-operative Banks/Societies Nadu - 1989-90
capital, overdue
in Tamil
Performance of IRDP in the Sixth and Seventh Five Year Plans and in 1990-91
Scheduled Commercial Banks' Direct Finance Percentage distribution of short and long-term loans according to size of land holding - All India and Tamil Nadu
Disbursement of Refinance for Various Purposes by NABARD (1982-83 to 1991-92)
The Share of Debt of Held by Different Official Evidence
Rural Households Creditors The
4.1 Ranking of the Five Taluks of Coimbatore District on the Basis of Selected Indicators
4.2 Ranking of the Blocks on the Basis of Selected Indicators
Page
B9
101
103
105
106
107
110
112
115
117
136
140
4.3
4.4
4.5
4.6
IRDP Performance in the Selected Blocks (1982-83)
Financing Small Borrowers Under IRDP by Various Bank Branches in Madathukulam Block During 1980-83
Financing Small Borrowers Under IRDP by Various Bank Branches in Pongalur Block During 1980-83
Number of Beneficiaries Financed Under Minor Irrigation Schemes in the Selected Blocks During 1978-82
4.7 Number of Beneficiaries Selected Under Minor Irrigation Schemes
4.8 Bank Branchwise Number of Under Dairy Scheme in Selected Blocks
Beneficiaries 1982 in the
4.9 Number of Beneficiaries Selected From Dairy Scheme - Categorywise and Blockwise
4.10
5.1
5.2
5.3
5.4
5.5
5.6
5.7
Functionaries Consulted During the Field Survey
Literacy Level of the Selected Beneficiaries
Membership and Daily Milk Procurement in the Selected MPCSs
Number of Beneficiaries applied for and Sanctioned of Second Loan
The Awareness of Selected Beneficiaries About Cattle Insurance Scheme
Possession of Cattle-sheds Selected Beneficiaries
by the
Utilisation of Dairy Loans by the Selected Beneficiaries
Investment Made in Dairy Scheme by the Selected Beneficiaries
141
143
144
146
147
148
149
150
165
168
171
174
176
178
181
5.8
5.9
5.10
5. 11
5.12
5.13
5.14
5.15
5.16
5.17
5.18
5.19
5.20
5.21
Change in Income Levels Small and Marginal Farmers; Mean Difference Between Pre Loan Periods
of Selected Testing of
and Post-
Incremental Income-Investment Ratio per Unit of Dairy Enterprise
Change in the Employment Levels of Selected Small and Marginal Farmers Testing of Mean Difference Between Pre and Post-Loan Periods
Value of Assets Before and After the Loan Period of the Selected Farmers
Change ciary holds
in Total Income of Per Small and Marginal Farmer
in Selected Blocks
BenefiHouse-
Total Income per Beneficiary and NonBeneficiary Small and Marginal Farmer Households in Selected Blocks
Milk Production Functions for Small and Marginal Farmers of the Selected Blocks
Loan Repayment Performance of Selected Small and Marginal Farmers
Changes in Income Levels of Agricultural Labourers in Selected Blocks Testing of the Difference Between the Means
Incremental Income-Investment Ratio per Unit of Dairy Enterprise of Selected Agricultural Labourers
Change in Employment Levels Agricultural Labourers Difference Between Means
of Selected Testing of
Value of Assets Before and After the Loan Period of the Selected Agricultural Labourers
Changes in the Income of per Beneficiary Household - Agricultural Labourers
Comparison of Total Income of Beneficiary and Non-Beneficiary Agricultural Labour Households
183
186
188
190
191
193
194
197
202
204
205
206
208
210
5.22
5.23
6.1
6.2
6.3
6.4
Milk Production Function Analysis Agricultural Labourers
Loan Repayment Performance of Selected Agricultural Labourers
the
Classification of the Selected Farmers by Size of Land Holding and Purpose of Loans
Membership of Selected Farmers to ASCS
Knowledge and Benefits Received under T & V Programme by the Selected Farmers
Opinions of the Selected Small Marginal Farmers on T & V System
and
6.5 Sources of Information to the Selected Farmers
6.6
6.7
6.8
6.9
6.10
6.11
6.12
6.13
6.14
Amount of Loan and SubSidy Received by the Selected Farmers in Block-I
Amount of Loan and Subsidy Received by the Selected Farmers in Block-II
Land Utilisation by the Selected Farmers - Before and After the Loan
Changes in the Extent of Irrigated Land by Beneficiaries According to Nature of Assistance Received
Changes in the Cropping Pattern of the Selected Farmers
Cropping Farmers
Changes in Selected Assistance
Intensities of the Selected
the Cropping Intensity of Farmers According to Received
the the
Adoption of New Agricultural Practices by the Selected Farmers
Gross Value of Agricultural Output (GVAO) at Realised Prices as Per-cent over GVAO Block Average Price
212
214
220
223
224
226
227
236
237
241
243
246
248
249
250
257
6.15
6.16
6.17
6.18
7.1
7.2
Block Price Levels Relative to District Average for Farm Produce (Ratios in PerCent)
Output, Cost and Estimated per Acre Net Crop Income of Sample Farmers in Block-I
Output, Cost and Estimated Crop Income of Sample Block-II
per Acre Farmers
Net in
Loan Repayment Performance of the Selected Farmers - Blockwise, Schemewise and Categorywise
Measures of Investment Worth per Baffaloe in the Selected Blocks
Average Value of Milk Supplied, Loan Repayment and Net Additions to Income of the Selected Dairy Loan Beneficiaries
7.3 Financial Viability Analysis - New Well Scheme
7.4
7.5
Financial Viability Analysis - Deepening of Well Scheme
Financial Viability Analysis Engine Scheme
Oil
258
260
262
264
278
286
290
292
293
Figure
1
2
3
LIST OF FIGURES
The Share of Debt of Rural Households Held by Different Creditors
Changes in Income of Beneficiaries
Changes in Income of BeneficiariesAgricultural Labourers
Page
118
192
209
CHAPTER I
INTRODUCTION
In order to ensure an overall development of
all the segments of rural society, many developing
countries are increasingly focusing attention on
assistance to the small and marginal farmers,
agricultural labourers and other rural poor especially
in the recent years. In this process, these countries
are expecting credit institutions to playa major role
in implementing the rural development programmes
including those meant for the rural poor. This
realization came after the bitter experiences and
failures in implementing many rural development
programmes which were based on 'trickle 1
down' theory,
which in turn relied primarily on a higher rate of
growth in Gross National Product (GNP) of a country.
This theory has been discarded by many empirical
t . 2 s udles and there is a growing emphasis on devising
integrated programmes (covering all the sectors and
sections of the people) for the harmonious development
of rural areas. Most of the developing countries,
including India, are now implementing such various rural
development programmes. One important component of
these programmes is credit, i.e., provision of loans and
subsidies through institutional credit agencies like
banks and cooperative societies to enable the rural poor
to undertake various productive schemes.
The envisaging of credit (investment)-oriented
programmes in developing countries is based on the
prevailing conditions in the rural areas of such
countries on the one hand and the assumptions3
underlying the rural development theories on the other.
Some of the important assumptions are:
i) Lack of capital for investment is one of the most
i i )
ii i )
4 important reasons for poverty in rural areasl
the small farmers are efficient but poor so they
d l · t 5 nee externa aSS1S ance;
the adoption of improved technology ln
agriculture, irrigation, land development and
dairying, requires massive investment on the part
of the farmers, but since their savings are low
they are to be assisted wi th external
institutional finance;6
2
iv) the diversification of rural economy is often
v)
vi)
vii)
suggested as one of the means for rapid economic
development (in India) which, requires deployment
of more capital (both directly and indirectly) in
7 rural areas;
the rural poor are taking loans fr~m non-
institutional sources (say private money-lenders)
which are costlier due to their higher interest
rates. Hence, the rural poor are to be provided
institutional credit (say commercial banks)
8 with concessional interest rates;
to reduce the dominance of rich in credit
cooperatives in the villages there is a need for
t l ' 't t' 9 governmen po lCY In erven lon;
the growing inequalities between urban and rural
areas in the developing countries have been
attributed to a large extent to the unequal
distribution of capital inve"stment between these
two areas. Thus, a shift in government policies
including credit policies from urban orientation
to rural orientation is warranted to cement the
10 gap; and
viii) to reduce the inequalities of wealth and income
distribution 1 1 among the rural households on the
3
one hand and to improve the financial position of
rural weaker section an the ather, there is a need
for positive disc rimina t ian in the rural
development policies including credit policies
(say subsidy oriented programmes) in
12 poor.
favour of
The Food and Agricultural Organization's (FAD)
13 Report noted that, "this situation (food and economic
crisis) has been exacerbated by the fact that, while
several of these countries have recorded notable
achievements in agricultural production, such economic
progress as they have made has largely by-passed the
vast numbers of impoverished small farmers and landless
agricultural labourers. The gap between urban-rural
incomes - and, even more, the gap between rich and poor
in rural areas - has not narrowed, but 1n many countr1es
actually widened". In this context it recommended an
integrated rural development programme and further
suggested that the credit programmes should be
formulated as an integral part of development programmes
in different areas. They should be conceived as part of
the development of specific SUbstantive sectors such as
food crops or animal husbandry or agro-industries. And
should be part of programmes aimed at developing
nat ional and local institutions which are capable of
4
serving small farmers (even in the remotest part of the
country) in a number of important and related matters
such as the supply of inputs, marketing, the
stabilization of food prices, and so forth.
While reviewing the process of provision of
agricultural credit in developing countries during the
thirty year period ending 1975 the above cited report
distinguished three stages as follows:-
First came the hopeful era of the fifties and
early sixties with large amounts of funds involved. But
little was known of the problems of servicing small
farmers with credit and the programme ended, broadly, in
failure.
Second, there was the IIcareful banking"
period, with the shift in bank portfolios to large
commercial enterprises and a consequent reinforcement of
dualism in many developing economies.
The third phase was characterized by a
willingness on the part of many governments to implement
the policiesl and by the efforts of the credit
institutions to simplify the hitherto cumbersome
procedures, which were identified as necessary to bring
credit successfully to the small farm sector.
5
The decade after 1975 may be termed as the
fourth stage, eKtending it on the lines of FAD report.
This stage is characterized by an integrated approach
towards rural development. 14 More significantly the
credit institutions are eKpected to cover all the rural
poor (i.e. even below the small farmers like marginal
farmers, agricultural labourers and rural artisans) and
extend financial help to them under various development
programmes. This marked a distinct shift in the
attitude of the credit institutions; shift from the
'asset based' lending policies to the 'need based'
I d ' 1" 15 en lng po lCles
Changes in the thinklng and policy orientatlon
which was observed in India during the above mentioned
fourth stage received an effective support at the Annual
Conference of the Indian Society of Agricultural
Economics held in 1981 when it noted that special
schemes designed for rural poor should not be relief
oriented but development-oriented. 16
Statement of the Problem
During the early years of institutionalisation
of credit in India, the institutional credit for
agriculture was viewed from the angle of protectlng
farmers from the grip of money-lenders. It was hardly
6
considered as an instrument of production enhancement.
When there was an expansion of credit to the rural areas
during the late sixties and early seventies, the role of
giving a push to the developmental process through
credit was getting increasingly realised. The credit
institutions were directed to provide credit to the
farmers to adopt the new strategy in agriculture.
A considerable progress has been made in the
field of expansion of institutional credit in rural
areas. However, the evaluation committees and
commissions appointed by the Indian government and
Reserve Bank of India (RBI) and also many research
studies found that the institutional credit was
distributed inequitably among the farmers. That is, the
credit had not reached the small and marginal farmers
adequately though they cultivated nearly 75 per cent of
the total operational holdings. Due to this, the policy
makers stressed the need for giving preference to small
and marginal farmers and agricultural labourers in
providing institutional credit. Thus, mere expansion of
institutional credit was found to be inadequate and
direct policy interventions by the government in the
field of institutional credit was envisaged. This made
the central government to issue special directives to
give priority to small and marginal farmers both In
credit disbursement and credit linked subsidies. These
7
policy interventions such as, Small Farmers Development
Agency (SFDAl, Marginal Farmers and Agricultural
Labourers Development Programme
Rate of Interest Scheme (DRIl,
(MFALl, Differential
and Integrated Rural
Development Programme (IRDPl had an impact in increasing
the share of institutional credit to the small and
marginal farmers and agricultural labourers.
The characteristics of the special programmes
and schemes framed for the benefit of weaker sections
made the schemes thereunder different from the normal
bankable schemes in regard to viability and other
principles of lending like technical feasibility, and
commercial viability. These were further, prominently
t~rget-oriented, a characteristic which outweighed other
considerations. Bankers often found it difficult to
adjust themselves to the needs of these programmes;
instead in their anxiety to minimise the probability of
default, they found it much safer to lend to a small
number of big borrowers than to a large number of small
borrowers.
The issues that have cropped up in the recent
years in the area of rural credit may be regarded as
second generation problems - problems that have arisen
in the wake of significant headway that institutional
credit to the rural sector has already made. Important
8
issues are: the identification of the special features
of the credit and subsidy oriented programmes,
examination of the problem spots in every phase of the
disposal of the credit and its utilisation; a proper
evaluation of the impact the credit has made on the
economic condition of small borrowers. Above all, an
investment will be considered financially viable and
remunerative by a small borrower if it leaves him a
surplus after meeting the debt service charges. These
are the issues which are to be probed further in detail,
to bring about the necessary changes in attitudes and
practices of rural credit institutIons. Hence, the
present study.
Objectives
The study has set before Itself the following
objectives:
1 ) To study the procedures of beneficIary
Identification and project formulatIon by the
banks.
ii) To examine the accessIbility of the selected smaii
borrowers* to the bank credIt, infrastructure
facilities and services.
* Those small and marginal farmers and agricultural labourers who have received loans for productive purposes from the organized financial institutions.
9
iii ) To investigate into the utilisation pattern of the
loans borrowed by the selected small borrowers.
iv) To assess the changes in the economic condition of
the selected borrowers between the pre-and post
loan periods,
v)
vi)
To find out the rate of return on the investments
made by
viability
the small borrowers and the financial
of the loans sanctioned to
borrowers; and
To examine the loan repayment performance of
selected borrowers.
such
the
The Significance and Scope of the Study
Credit alone has little or no impact on the
development of agriculture or on the living conditions
of rural population, although conditions might be worse
without it. The aim should be to convert the static
credit into dynamic credit, which means that at the end
of the period the borrower has increased his assets,
productive power and income. This is real development
credit leading to a gradual change in the 1 nterna 1
economic structure of the borrower household. To this
effect there is a need for lndepth empirical studies to
provide
marginal
answers to the question of how the small and
farmers and the agricultural labourers can be
10
made viable units with the help of institutional credit.
As on to-day the expansion of banking to the rural areas
may be said to have been achieved, in quantitative
terms, but the real challenge is to bring about a
success in qualitative terms. By focussing the
attention on such relevant issues as accessibility of
rural poor to the institutional creditl the utilisation
of credit; and the impact of credit on the economic
condition of the small borrowers, the present study may
contribute some relevant ideas to the eKisting
literature. Moreover, it is hoped that the testing of
financial viability of the schemes undertaken by the
small and marginal farmers and agricultural labourers
with the help of bank loans and the results would have a
wider application.
The paramount need at the present juncture is
to ensure higher productivity of institutional credit
and better recycling of funds. The analysis of the
empirical data in this study may provide some insights
into this particular aspect.
As noted by the RBI in one of its 17
reports ,
the strength and weakness of the credit delivery system
in the rural sector need to be reassessed. The present
work, in a modest way, would suggest some POliCY
measures to improve the rural credit delivery system.
1 1
Limitations of the Study
The following are the important limitations of
the study:
The primary data for the study has been
collected exclusively by personal canvassing of
interview schedules. The data so collected are subject
to what may be called the 'error of response' in some
degree or other. Such errors of response are largely
due to the illiteracy of most of the respondents.
Data on the cost of cultivation, maintenance
expenses of milch animals, income from different crops,
income from dairying, employment in dairy enterprise,
etc. for different years may not be precise/accurate,
specially if they are to be furnished for the past years
in view of the fact that majority of the selected small
and marginal farmers and almost all the
It
agricultural
labourers do not maintain accounts. is for this
reason a pilot survey was conducted and on the basis of
that the structured interview schedule was finalised.
Wherever possible the data collected (price of animals,
cost of inputs, milk yield, quantity and value of
agricul tural output and wages) have been cross-checked
for their accuracy.
12
The Chapter Outline
The contents of this thesis have
presented in eight chapters. Following
been
this
introductory chapter (Chapter Il which has dealt with
the the research theme, researchable issues, objectives,
significance, and scope of the study, in the second
chapter a review of theoretical issues and empirical
studies pertaining to the present exercise has been
carried out. The structure and growth of institutional
credit
have
in India and to a limited extent in Tamil
been briefly analysed in the third chapter.
Nadu
The
fourth chapter is devoted to explain the methodological
framework of the study, that is, about the selection of
study area and sample, methods of data collection,
concepts used and methods of data analysis. The returns
to investment in dairy scheme are analysed in the fifth
chapter.
in minor
financial
In the sixth chapter the returns to investment
irrigation schemes are dealt with.
viability analysis of both dairy scheme
The
and
minor irrigation schemes is taken up in the seventh
chapter. And in last chapter a summary of findings and
conclusions are presented.
13
Notes and References
1. One of the development strateQies advocated to develop the poor countries was massive capital investment in core sectors of the economy, instead of investing meagre amounts in all the sectors. This was expected to increase the growth rates of not only those sectors which received huge capital investment but also of other sectors, due to the working of spread effects in the economy. This theoretical line of thinking placed emphasis primarily on increasing the production (GNP) rather than on equitable distribution.
2 For details, among others.
a) Belshaw Horace, Agricultural Credit in Economically Undeveloped Countries, FAD, Agricultural Studies, No. 46, Rome, FAD. 1959.
b) Padmanabhan K P, Rural Credit: Lessons for Rural Bankers and Policy Makers, London, Intermediate Technology Publications, 1988.
c) A report by ILO summarises this point, and states, "a series of development studies since the early seventies has concluded that aggregate growth by itself has not led to redistribution of assets or incomes, and the condition of the poor has remained much the same since the era of developmental effort started. Growth and social change must, therefore, go together and direct attention should be given to the removal of poverty. It was only in the late seventies that in many countries special programmes for poverty alleviation such as cash doles, special schem.s for employment promotion, or other target--group oriented programmes were launched." International Labour Organisatlon, Fightlng Poverty: Asia's Major Challenge, New Delhi, Asian Employment Programme (ARTEP), 1986, p.7.
3. More elaborate and critical treatment of this kind of assumptions about rural credit can be seen
(a) Von Pischke J D, Dale W Adams, and Gordon Donald (Eds), Rural Financial Markets Dl Developing Countries- Their Use and Abuse, Johns Hopkins, Baltimore, 1983 and
14
(b) Adams 0 W, Douglas H Graham, and Von Pischke J 0, Undermining Rural Development with Cheap Credit, Boulder, Colorado, Westview Press, 1984.
4(a)
(b)
5 ( a )
(b)
Nurkse, Ragnar, Problems of Capital Formation ~ Underdeveloped Countries, Oxford, Basil Blackwell, 1953, and
Robert D Stevans (Ed), Tradition and Dynamism in Small-Farm Agriculture ~ Economic Studies Dl Asia, Africa ~ Latin America, The IOWA state University Press, 1977.
Schultz, T W Transforming Tradltional Agriculture, Yale, 1961.
____ , Economic Growth York, McGraw Hill Book Co.,
and Agriculture, 1968.
New
(c) Hayami Yand Ruttan V, Agricultural Development: An International Perspective, Johns Hopkins, 1971.
6 (a) Belshaw H, QR. Cit. and
(b) Adhvaryu J H, "Financial Intermediation and Development", The Indian Economic Journal, Jan-March 1979, pp 63-88.
Rural 26 (3) ,
7 Since the late sixties (under special
8 (a)
developmental programmes), various state governments have spent large sums of money on animal husbandry, poultry, forestry, and logging and fishing, particularly with a view to improving the economic condition of the relatively weaker section of the rural population.
Lipton, Michel, "Agricultural Finance and Credit in Poor Countries", World Development 1976, pp 543-53, and
Rural 4 (7) ,
(b) Griffin, Keith, The Political Economv of Agrarian Change, New Delhi, Macmillan, Second Edition, 1979 p 26.
9 For more details, among others,
a) Rao, C H H "Farm Size and Credit Policy", M R and Sharma D P (Eds) Rural Bankinq ~ New Delhi, Oxford, 1975(b), and,
15
in Tokhi India,
b) Hans-Dietei Roth, "Money lenders' Mana!;lement of Loan Al;lreements: Report on a Case Study in Dhanbad," Economic and Political Weekly, 14(28), July 14, 1979, pp 1166-70.
10 This type of others, by:
arl;lument was put forward, amon!;l
a) Lipton, Michel, "Stratel;ly for Agriculture: Urban Bias and Rural Planninl;l", in Streeton, Paul and Lipton, Michel (ed). The Crisis of Indian Planning, Oxford University Press, 1968, ELBS Edition, 1972, pp 83-147.
b) , \ib.:t. Poor People Stay Poor =- Urban Bias in. World Development, Temple Smith, 1977.
c) Nanjundappa D M. "Rural Bias for Development" in Brahmananda, P R, Narayan B K, and Kalappa (Eds), Dimensions of Rural Development in. India, Bombay, Himalaya, 1987, pp 100-121.
11. Many field investigations have revealed that the so called 'Green Revolution' in India has resulted in widening the !;lap in the distribution of income and wealth between the bil;l and small farmers in rural India. Notable amon!;l them are
a) Bardhan, P Distribution: Economic and 877-82.
K and Srinivasan, T N, Patterns, Trends and
Political Weekly, 6(17),
II Income Policies", 1971, pp.
b) Sing, Katar "The Impact of New Agricultural Technolol;ly on Farm Income Distribution in Aligarh District of U.P." Indian Journal of Agricultural Economics, 28(2) April-June 1973, pp 1-11.
c) Johl 5 5, "Gains of the Green Revolutionl How they have been shared in Punjab", Journal Q.f. Development Studies, 11(3), April 1975, pp 178-89.
d) Raju V T, "Impact of New Al;lricultural Technology on Farm Income Distribution in West Godavarl District, India", American Journal of Agricultural Economics, 58(2), May 1976, pp 346-50.
16
12 Among others refer:
a) Donald C Taylor, 'Farm Manaoement: Its Role ~ Alleviating Institutional Constraints Facing Asian Small Farms', The Agricultural Development Council Inc., No.25, September 1980.
b)
c)
13
Prasad, Kamta, Financial Intermediaries and Development (Rapporteur's Report), The Economics Journal, 26(2), Oct-Dec 1978, pp 304.
Rural Indian
287-
Ratnam N Institutions 32(1) Annual
V "Restructuring Panchayat Raj is the only Remedy", Kurukshetra,
Number, October 1983, pp. 8-12.
Food and Agricultural Organization, Agriculture ~ the Third World, Rome,
Credit 1975.
14 For EKample, Integrated Rural Development Programme (IRDP) was introduced in 1978 in India.
15
a)
Detailed analysis can be seen in
Tendulkar, Suresh D, Rural Institutional and Rural Development: A Review Article, Economic Review. 18(1), Jan-June 1983, pp. and,
Credit Indian
101-37,
b) Hooda I S, 'Changing Thoughts and Programmes of Rural Development in India", The Asian Economic Review, 34(2), August 1992 pp 418-35.
16 Shah, S M Rapporteur's Report on "Special Programmes for weaker Sections as a Strategy for Improving Income Distribution", Indian Journal of Agricultural Economics, 36(1) Jan-March 1981, pp 31-34.
17 A Review of the Agricultural Credit System in India, Report of Agricultural Credit Review Committee, Bombay, RBI, 1989.
17
CHAPTER II
REVIEW OF LITERATURE
In this chapter a review of the
literature, both theoretical and empirical,
availabl.
has been
done for gaining a perspective on the problems and
issues related to the present study. The review is
presented in two sections.
The first section reviews the theoret ical
propositions formulated by various economists from time
to time relating to the role of credit/capltal and
credit institutions in the process of development of
both developed and developing countries. It a Iso
presents
expressed
a brief summary of various view points
about some of the credit linked development
programmes which were formulated and implemented with
respect
groups.
to specific regions and/or specific target
This section thus serves a useful purpose of
providing a theoretical framework for the present study.
In the second section, a review of empirical
stUdies conducted by (i) the government organizations
18
like Programme Evaluation Organization (PEO) of Planning
Commission, Reserve Bank of India (RBI) and National
Bank
( i i )
for Agriculture and Rural Development (NABARD) ;
research institutions, and (iii)
researchers on the role and impact
institutions and their credit schemes on
conditions of rural poor, is presented.
of
the
individual
bank inc;)
economic:
Since the
present study has taken up the question of institutional
finance to small borrowers relating to two specific
schemes - Dairying and Minor Irrigation - the review of
literature centres around studies relating to these two
schemes.
SECTION I
REVIEW OF THEORETICAL ISSUES
The role of financial institutions in the
economic growth of the developing economies has come
under scrutiny by economic planners and other policy
makers in these countries. 1 Mobilisation of domestic
financial resources, either to supplant or to supplement
external financial assistance where it is available, has
assumed a central role in development programming.
Financial institutions are also being increasingly
19
utilised to channel such resources to economic sectors
considered essential for growth and social equity. The
attention focused on the financial intermediaries has
induced the governments of a wide range of developing
countries to assume direct control of financial
institutions. In India, the nationalization of 14 major
commercial banks in 1969 was considered as the best
example to this phenomenon. And the consequent
developments in handling the banking sector by the
Indian government were an indication that financial
intermediation was recognised as an important source in
the search for ways to improve the growth prospects.
Financial System and Economic Development
One of the most important problems in the
field of finance, is to understand the effect of the
financial
2 growth.
system and its development on
The question of whether financial
and development
sectors of the
have any
economy,
impact on
and if so,
the
how
economic
structure
productive
much, has
elicited a wide range of answers frOM economists. A
major point of the resulting controversy is whether the
development of financial institutions matters at all for
economic growth. The diversity of opinions varies from
considering the development of financial institutions
20
(banks in particular and occasionally including non-
monetary financial institutions) as a necessary factor
for the economic growth of developing economies, to
holding that it is neither necessary nor sufficient for
growth.
The more positive view on the rol e of
financial institutions in economic development is held
by a SUbstantial proportion of the students of financial
development. They all attribute a positive role to
financial institutions in the development process. Th is
view is traditionally associated with Schumpeter's
analysis of the theory of economic development, more
aptly termed the theory of capitalist
3 development. According to Goldsmith, both
theory and economic history assure that the
and development of a superstructure of
economic
economic
existence
financial
instruments and financial institutions is a necessary,
though not
4 development.
sufficient, condition of economic
Other proponents of the positive view of the
rol e of financial
M . 5
arrlS , Came ron
institutions include Adelman and
et. 6 a l. ,
7 Gerschenkron , MckinnnnB ,
Goldsmith9
, patrick10
, and Shaw 11 to name a few. The
relative magnitudes of the impact attributed to banks
and other financial institutions in developing economies
21
differ among these authors. In the following
paragraphs, the earliest and some of the more recent
positive views are presented.
Schumpeter spoke of credit as a phenomenon of
development and regarded the banking system, along with
entrepreneurship, as being the key agent in the process
12 of development. Gerschenkron's seminal work has shown
the important role banking system played in European
economic 13 development. According to Cameron, the
positive contribution of financial institutions, in
igniting the process of growth of a country depends upon
how banking policies are pursued and on the pattern of
evolution 14
of the banking structure. Gurley and Shaw
made an elaboration of the financial intermediation and
widened the spectrum of financial assets available to
the 15 community in the process of development. Cameron
thus concludes that both theoretical reasoning and the
the historical evidence suggest that the banking system
plays a positive, "growth-inducing" role as well as
responding passively to the demand for financial
. 16 serVices.
Capital Formation and Growth
A meaningful role of banks in the savings-
investment process of developing economies is often
22
emphasised by the modern economists. This approach is
based on the generally accepted assumption tha t a
continuous/permanent increase in physical cap ita 1
formation is essential for the growth of an economy.
That physical cap i tal formation exerts a
strategic influence on the path and pace of economic
expansion is well founded in economic thought. The
vital role of physical capital accumulation in growing
economies has indeed been a point of agreement of all
major schools of economic thought. This emphasis on
capital formation is found in claSSical, Marxist, neo-
classical and Keynesian analysis of the growth process.
The current literature concerned with the economic
development problems of developing countries also
stresses, in varying degrees, the role of capital
formation.
In classical doctrine, the growth of economy
was thought to be determined by the availability of the
f t f t " 1 17 ac ors 0 produc lon a one. As the supply side of
the economy was dominant, the more abundant were these
factors of production, the fewer were the limitations on
the capacity to grow. Moreover, since land was assumed
to be fixed, and labour was considered a surplus input,
capital accumulation was allotted centre stage.
23
According to Marx, by means of the banking
system the distribution of capital as a special
business, a social function, is taken out of the hands
of the private capitalists and usurers. But at the same
time, banking and credit thus become the most potent
means of driving capitalist production beyond its own
limits, and one of the most effective vehicles of crises
and swindle. 18
The Neo-classical doctrine is based on a truly
perfect capi tal market. It advocated that the
intervention in any form in its functioning like low
deposit rates and the low ceiling on loan rates restrict
financial development and subsequently re a I
19 development.
20 Keynes, in his General Theory of Employment
Interest and Money, offers capital investments as an
explanatory variable of economic expansion, decline and
stagnation. In Keynesian analysis of the path of
economic growth, the rate of investment is a definite
indicator of the turning points, be they booms or
crises. In Keynesian theory, not only did capltal
investment play a central role in the capacity of
production expansion and labour productivity, but was
also found to be the most volatile component of
aggregate effective demand of the economy.
24
Post-Keynesian capitalist growth theory for
the matured economy generally has insisted on placing
capital accumulation at centre stage and focusing on the
resultant secular increases in labour productivity.
The emphasis on capital formation in
contemporary growth models is based on the fact
the
that
investment increases income as well as productive
capacity. The literature pertaining to the economic
problems of developing countries has also stressed the
shortage of savings and low levels of investments. In
its most popular presentations, the emphasis on the
savings/investment process in the limited growth of
developing countries is indicated by the vicious circle
of poverty 21 arguments. Both Lewis and
emphasised this view point and stated that the
Rosto",
increase
of capital investment from 5 to 10 percent or more of
net national product is a necessary requirement for the
22 take-off of any economy.
dominant
however,
The emphasis on capital formation has been
among modern development economists
at the same time, reservations are held
and
about
the strategic role assigned to capital formation to the
neglect of all factors.
25
Alternative Hypotheses with Respect to the Role of Banks
in Economic Development
The literature on the role of commercial banks
in the savings-investment process, and in particular
comprehensive stodies on the contribution of the banks
to capital formation, may be classified under two
distinct hypotheses: the financial repression hypothesis
and the structuralist hypothesis.
Financial Repression Hypothesis
The f inanc i al repression hypothesis
associated with the works of Cameron, Mckinnon
is
and
23 Shaw. All the three authors are strong advocates of
the efficacy of financial development
significantly to the real growth
in contributlng
of developing
economies.
(financial
They contend that the banking system
institutions system in the case of Mckinnan
and Shawl is invariably growth-inducing and that only
when it is repressed, which in their view is often the
case, would it fail to make a positive contribution and
would act as an obstacle to real growth.
The fin anc i a 1 repression hypothes1s
essentially preaches the virtues of reliance on market
forces. According to the authors of this propos1tion,
the financial system-primarily the banking system 1n
26
these economies is most conducive to economic growth
once it is allowed to operate under free-market
direction. In summary, this hyplothesis explains the
most, if not all, the factors contributing to the "poor"
performance of the lagging economies in terms of
internal policy-induced distortions. <The regulated
interest rates and other forms of intervention in bank
lending policies are said to be the reasons leading to
financial repression). The low ratios of bank deposits
to total domestic savings is traced to the low ceilings
on deposit rates. The record of organised bank loan
issues being biased against small industrial and
agricul tural producers is explained as a d i rec t
manifestation of the low ceilings on loan rates.
Therefore, the more pervasive the government's
intervention in terms of deposit and loan r-ates, in
direct portfolio control, and so on, the less responsive
will the banking system be to economic development.
Another school of thought is also against the
government intervention in the credit market and opposes
the prOVision of cheap credit through the formal credit
institutions to the small borrowers but for other
reasons. Particularly Adams, Donald Graham, and Von
P · k 24 lsch e in their writings emphasise this aspect for
the following reasons. Firstly, viability of financial
27
institutions serving small farmers could be eroded by
low interest rates, high administrative costs assoclated
wi th administering small loans, and cumbersome banking
practices that are inappropriate to the needs of the
small farmers. Secondly, the village moneylenders will
continue to dominate the rural credit scene becau~e of
their easy approach ability, informality and
flexibility. So, the private moneylenders can be
utilised as agencies by the formal lenders, to reach
large number of clients with minimum cost. Thirdly, the
product prices, crop yields, and the costs of production
are much more powerful determinants of farmers'
decisions than are credit availability or interest
rates. And, finally, interest rates are critical ln
th~ performance of financial markets, and
cheap-credit policies are a major reason for the poor
performance of rural financial markets in
countries. They destroy the incentives
low
for
income
rura I
'households to save in financial form and seriously
distort the way the lenders allocate loans.
The Structuralist Hypothesis
The structuralist hypothesis, better known as
the Gerschenkron hypothesis,25 is derived from
hlstorical interpretations of the role of banks in the
28
cap ita 1 formation processes of early European
industrial industrialisation. In general ising from the
cap ita 1 needs and financial sources of early European
industrialisations, and in particular the English,
German and Russian experiences, Gerschenkron concludes
that the role of banking in industrial capital formation
is determined by the relatiye backwardness of an economy
and its structural peculiarities.
The relationships he found, following the
chronological order of European industrialisation, are:
( i )
i i )
The more advanced economy requires only minimum
cap ita 1 inyestmentsj that is, for adyanced
(developed) economies, the cap ita 1 needs of
industrialisation are met outside the banking
system -household earnings and internal business
or agricultural savings were sufficient to finance
the small plants necessary for manufacturing.
In contrast, the relatiyely backward
(moderately backward) does require some
economy
special
institutions to supply long-term funds for
industrial capital.
<i i i) Finally, in the case of extremely backward
economies (deyeloping countries) the structure 15
such that not eyen the banks could supply t ~ .• e
29
necessary cap i ta 1 and entrepreneurship fol'
industrialisation. This has been due
drastic shortage of private savings and
lack of enterprise, in these economies.
to the
eKtr-eme
Implicit in the above characterisation is the
notion that banks are either unnecessary or ineffectual
in the eKtreme stages of development and could be
utilised as a source of capital only in the intermediate
stages.
In short, according to financial repression
hypothesis,
intervention
it is the eKtent and nature of government
in the working of financial institutions
that determlnes their (banks) contribution to economlC
growth, wh i 1 e the other hypothesis holds that the
structure of the economy and its level of development
decides the nature of financial institutions and thelr
involvement in capital formation and real growth.
However, when it comes to the applicability of the above
mentioned two alternative hypotheses with respect to the
role of banks in economic development of the developing
countries like India, both have serious 1 1mi tat ions.
The assumptions underlying the financial f"epr-ession
theory li ke minimum state intervention in the
functioning of banks and the free play of market forces
(liberalisation) as a pre-condition for economIc
30
development
developing
are not suitable in e~plaining the case of
countries. The reasons are many and
important among them are:
(i) Dominance of agriculture (which is carried out
mostly for subsistence) with highly
asset structure (mostly land).
inequitable
( i i ) Dualism in the capital/credit market, and
(iii) Low-monetisation in the economy.
As far as the second hypothesis is concerned,
it may be questioned in terms of its general
applicability, since it is based on the historical
analysis of the e~periences of the industrialised
countries. However, the importance of capital formation
and the role of banks in the economic development of the
developing countries have hardly been emphasised here.
Taking clue from the theories and e~planations
In the earlier paragraphs an effort has been
analyse the theoretical ramifications of the
banks in capital formation in India with
analysed,
made to
role of
a special
reference to agricultural and rural development.
31
Theoretical Issues with Special Reference to Developing
Countries like India
The vast majority of developing countr1es are
agrarian in economic, social and cultural outlook.
Agriculture, both subsistence and commercial, forms the
principal economic activity in terms of the occupational
distribution of the labour force, if not in terms of
proportionate contributions to the gross nat iona 1
product. Inspite of many common problems these nations
face (low levels of living, low levels 01 productiVity,
high rates of population growth, high and rising level!l
of unemployment and under-employment, significant
dependence on agricultural production and primary sector
exports, and dominance, dependence and vulnerability in
international relations),26 the development strategies
vary from one country to the other depending on the
nature, structure, and degree of interdependence among
its primary, secondary and tertiary sectors.
However, one point which is common among them
is the real isation that a sound strategy has to be
developed to mobilise capital resources to 1nvest 1n
their developmental activities. And to this effect they
have been gearing up their banking structure - central
banks, development banks, commercial banks, cooperative
banks and formulating policies and programmes from
time to time.
32
In what follows, by leaving aside an in-depth
analysis into the issues relating to central banking
(like Reserve Bank of India) and development banking
(like Industrial Development Bank of India) since they
are not directly relevant in the present context, the
issues raised with respect to the role of commercial
banks and cooperative banks in agricultural and rural
development are discussed in brief.
In developing countries like India, as most of
the farmers don't have their own resources to finance
the process of modernisation, they rely heavily on
borrowings. In other words, farm credit plays the roll!
of an 'accelerator' of agricultural development.
However, for this, credit should be adequate in
quantity, cheap and development oriented as suggested by
scholars 1 ike 27 Belshaw, Baun,
30 31 Gurley and Shaw, and Schultz.
28 et. al. ,
29 I"1urray,
Schultz contends that the farmers who practice
the traditional farmlng are 'efflcient but poor'. To
turn the farmers towards the modern methods of
cultivatlon and to increase the agricultural
productivity he suggests two things: technological
change and institutional innovations. Implied in this
theory is that the modification of financial
institutions is of crucial significance, as farmers
33
particularly the poor farmers require external financial
assistance to adopt the new technology in agricultL\re
since it is capital intensive.
Hayami and Ruttan's 32 "induced Development
Model" built on the Schultz theory develops an
"explanation of the mechanism by which a society chooses
an optimum path of technological change in agriculture".
This theory advances four interrelated mechanisms as
critical elements of agricultural development:-
( i )
( i i )
( iii )
( i v )
Induced innovation in the private sector;
Induced innovation in the public sector;
Induced institutional change, and
Dynamic sequences in the development process.
And this model proposes that lnstitutional
change is induced by individuals perceiving new economic
opportunities that could be secured by
modifications.
33 Stevens further hypothesises
institutional
that the
institutions that govern the use of technology or the
mode of production can also be induced to change in
order to enable both individuals and society to take
fu 11 e r advantage of new technological opportunities
under favorable market conditions. According to him,
labor is abundant but land is a constraint in the
34
r1 ''-
~. "C,-, 035 1.","-
\, --', \,)-' \) .~ I,
developing economies and under these resource
constraints small farmer development requires increased
producti.vity pel" unit of land. However, as the
agricultural transformation accelerates, capital
resources and credit are emerging as limiting factors.
Workable procedures, for the delivery and repayment of
credit in small farm areas, therefore, become essential
to rapid growth.
After reviewing some of the literature on
credit and agricultural development, Bathrick34 refutes
the traditional-simplistic-view that the provision of
low interest credit alone is the key to the economic
development of the small farm sector. Ursula K Hicks35
also points out that in respect of credit for the little
man there is considerable danger that a government may
entangle itself in bad debts and open-ended subsidies
which contribute little to development. So the
administration of credit can usefully be combined with
other agricultural services and advisory organisation.
f t d ' 36 t 37 A host 0 s u les, repor s
Bank of India and other organizations) and
(by Reserve
38 documents
prepared by international organisations llke Food and
Agricultural Organ isat ion (FAD) and World Bank,
consider c red i t as an essential instrument for
agricultural and rural development and point out that
35
the technology should be modernized and the small
farmers should be given a special treatment. HDwever'" a
glaring omission of this type of 'generalistic
approach/theory' is the inadequacy of attention to the
interrelationship between agrarian structure, on the one
hand, and inadequacy of credit to the small farmers and
the preferred model of the institutional system
credit on the other.
Urban-bias Theory
39 Myrd a I, L ' t 40 lp on,
41 Streeton,
of
Raj
K 'h 42 d N 'd 43 d h f th rls na, ,an anJun appa an a ost 0 a ers hold
tha t there is an urban-bias in rural banklng and
planning. Myrdal remarks that "studies in many
countries have shown how the banking system if not
regulated to act differently tends to become an
, instrument for siphoning off the savings from the poorer
regions to the richer and more progresslve ones where
returns on cap ita I are high and 44
secure". His
principle of circular and cumulative causation explains
the flow of rural savings into the urban economy through
the banking mechanism in a market economy.
Big-farmer Bias Theory
Griffin,45 L ' t 46 47 1 P on, Rao,
48 Parthasarathy,
and a large number of Indian Economists hold the Vlew
36
that there is a big-farmer bias in rural banking. For
example, Griffin provides an interesting explanation for
non-innovation by small farmers in terms of ( i )
Inequalities in land ownership and ( ii ) , Landlord-
biased' technical progress. According to him the most
important reason for the bias of the '~reen revolution'
(in favour of the big farmers) is the bias of government
policy.
For Lipton, the relation between blg-farmer-
money lenders and small-farmer-borrowers can frustrate
investment by both the groups.
According to Rao, a major criticism of
ab Ie institutional finanCing is that large farmers are
to secure a large finance from institutions, some of
which might have been diverted for unauthorised purposes
or money lending to small farmers, with a view to
securing economic and social hegemony.
This set of theories argues that though the
new agricultural technology is scale-neutral, the access
to the capital and other input markets is r,ot scale
neutral. That is, the access to the instltutional
credit market becomes proportional to the size of the
owned assets. According to Tendulkar49
the access to
relatively low interest bearing institutIonal loans is
37
extremely I imi ted for the vIrtually assetless soc 1 a 1
classes such as the agricultural labour and the artlsan
households and those cultivator households ( In
particular, the marginal and the small farmers) who are
at the lower end of the asset scale.
In terms of numbers, the small farmers
dominate the rural scenario in all the under developed
countries. However, they are usually outsIde, or at
best only marginally involved in the commercIal sector
and have little capital to invest in output increasing
t · . t· 50 ac IVl les.
Self-Liquidation Theory
This theory has been advocated by the bankers
who strongly believe that once the necessary amount IS
sanctioned to a project it automatically becomes VIable
and the loan amount is repaid in the process. A report
prepared for the Reserve Bank of 51 IndIa says th at th e
c r it e r i on of feasibility ensures that the lnvestment
proposed to be financed is justifIed on economic
considerations and at the same time prOVIdes a bUllt-ln-
cover for the loan by demonstratIng that It IS 5elf-
liquidating.
3B
The Growth with Equity Theory
Even as the socialistic ideals of reduction of
inequality and a more eVen distribution of economic
power were reiterated during the fifties and early
sixties,
validity
theory,
the emphasis on "growth first" gained greater
wi th the writings of Rostow52
on the stages
Simon Kuznet's53 on the legitimacy of widening
gaps in the initial stages of development, and Lewis's54
on economic growth and use of surplus labour from
agriculture. However, the hopes built on 'Trickle down
effect theory' have been belied during the fifties and
sixties when the world found the lack of trickle-down
effects of growth, the increasing inequalities, and the
impoverishment of the bottom 40 percent of the
underdeveloped world.
Since the late sixties and the early seventies
there has been an attempt to translate development in
humane terms with an emphasis on providing baSiC
standards for the poorest sections. There has been a
marked shi ft from the dominant "growth-first-
redistribute-later" approach to strategies promoting
growth with equity and redirecting resourc~s with a
favourable bias towards the poor 'target groups',55
39
In the writings of eminent Indian
especially by agricultural economists,
I!~onomiste;,
like 56
Rao ,
D .57 B 11 58 59 60 eSal ha a, Bhalla and Chadha and Dantwala the
concept of equity has been given a predominant place.
The offi~ial realisation of this phenomenon came when
the All India Rural Credit Review Committe~ Report was
submitted in 1969,61 which revealed the inequitable
distribution of credit by the cooperative societies.
And to arrest the situation of increasing inequalities,
the 'target group approach' seems to be a popular well-
organised top-down method favoured by among others, the
World Bank and the Indian Government. This may be
called a 'technical-managerial approach. The usual
method is to set up institutions and redirect resources
towards these "target groupsll._
In the past, inequality has been defended by
some economists on the ground that it is a source of
cap ita 1 accumulation and economic growth. They have
argued that to try for equitable distribution before
completing the task of capital accumulation is to work
for redistribution of poverty only. As put forward by
Joshi 62 here. lies an intellectual challenge of creating
a theory which can harmonise the task of capital
accumulation with that of poverty eradication, ie what
is termed as "Development with Social Justlce".63
40
The Structuralistic Theory/Approach
Considered from objective stand point, neither
the classical capitalist nor the classical socialist
pattern should serve as the ideals to be followed by the
Third 64 World Countries like India today. The problem
(of Indian economy) lies in the fact that the planners
have accepted the legitimacy of a model of development
which facilitates growth but accentuates inequality.
And the logic of the argument is that if the present
distribution of assets left in tact and the modern
technology is brought into this structure, it will, as
Mahatma Gandhi said, bring 'Mass Production' but destroy
'Production by the Masses'.
Those who advocate a structural change as a
pre-condition for economic growth with equity include
th 8 dh 65 R 66 K . 6 7 J h .68 among 0 ers, ar an, , udra, url en, OIS 1 and
Bhaduri. 69
The structuralists are the opponents of the
target group approach. They view that this kind of
redirection of resources invariably finds its way
towards more influential sections of the community.
According to them agricultural credit should be viewed
not in isolation but in relation to supporting services
and the needs of i'mproved technology. The u.s.
41
agricultural credit models based on individualised
supervision approach cannot be replicated in developing
cDuntries. And adequate attention should be paid to the
inter-relationship between agrarian structure, on the
one hand, and institutional credit system and the state
policies towards the input and output markets, on the
other.
Various theories/view points discussed
hitherto (relating to the role of agricultural credit in
the Third World Countries) may be summarised under
alternative perspectives as follows:
Agricultural Credit Markets Different Perspectiv@s
The development of agricultural credit markets
and the provision of agricultural credit have been major
programme activities in agricultural development by the
u
and
S Agency for International Development, World
70 the several Regional Development Banks.
emphasis on credit is based on five perspectives.
First is the Schumpeterian view,
identifies innovation as the critical element
Bank,
This
which
in
economic development and credit as th e prlncipal
instrument that allows the innovator to bid resources
away from other activities.
42
A second perspective is based on a view
similar to that of market reform: The farmer obta.ins
credit, sells his output, and often gets his job or
rents his land from the same middleman and is thought to
be exploited in each transaction.
Third perspective (which is closely related to
the second) , views public credit institutions as
providing part of the supervised education and credit
package designed to induce traditional farmers to adopt
modern inputs.
A fourth perspective views credit as an income
transfer mechanism to lessen
distribution in rural areas.
inequalities in Income
The fifth perspective views subsidized credlt
as an incentive to farmers to expand production in spite
of disincentives resulting from market interventions or
exchange rate distortions that discriminate agaInst
farmers in product markets.
The ongoing programmes of the Indian
government to develop the rural areas in general and
small and marginal farmers and agricultural labourers in
particular, with the help of credit institutIons are
based on the fifth perspective.
43
SECTION II
REVIEW OF EMPIRICAL STUDIES
This review (of empirical studies) focuses on
the aspects/issues discussed and the methodologies
adopted by the selected studies.
Several aspects/issues touched upon in thesl!
studies may be categorised, for the convenience in
discussion, as follows:-
i ) Availability/Accessibility and utilisation
of credit,
i i ) Impact of credit Dairy loans,
iii ) Impact of credit Minor irrigation loans,
i v ) Loan repayment, and
y) Viability of loans.
iL Availability/Accessibility and Utilisatign of Credit
While studying about the problems of small and
marginal farmers in India, the National CommissiOn on
A. 71
grlculture ( 1976) observed that IIi t has been
increasingly realised that the small and marginal
farmers, if helped with necessary resource and guidance,
can increase their crop production. The handicaps from
44
which the small and marginal farmers suffer are lack of
resources, facilities, technical guidance and allocative
efficiency."
Mukhopadhyay and Ra072
stated that the
strategy of agricultural development during the sixties
and seventies was characterised by accent on higher
productivity of foodgrains, rather than on equity norms
in terms of accessibility of material, advisory benefits
to different categories of farmers and gains therefrom.
Pate1 73 in hiS study found that the large
farmers were cornering the institutional credit because
of their easy access to these institutions. H d .74
a iman 1
found that since the rural poor were not having the
political power to control credit organisations like
cooperatives they were deprived of credit facilities.
Moreover, the process of getting loan itself was not
easy and liberal to the small farmers, as observed by
7S Singh and others. And they also stated that the small
and marginal farmers were not receiving required
assistance from the extension officials to adopt new
technology since most of them were illiterates.
The CRAFICAR076
study found that the access
to relatively low interest bearing institutional loans
was extremely limited for the virtually assetless social
4S
classes such as the agricultural labour and the artisan
households and those cultivator households (in
particular, the marginal and the small farmers) who were
at the lower end of the asset scale.
R 77 . f Mohana ao examined the accessibility 0 the
borrowers from a different point of view. According to
him the typical borrower in the unorganised credit
market has no access to the organised mark~t. This
isolation, coupled with an inelastic demand for credit,
allows the private moneylenders to decide freely what
interest rate to charge. Furthermore, the highly
personalised relations between lender and borrower
permit the lender to secure from the borrower the
collateral which the latter cannot employ in the
organised market.
78 A study conducted by Roshan Singh and others
in Bidpuri block in U.P. revealed that the avallability
of commercial bank credit was much higher on large farms
as compared to small and medium farms. It concluded, on
the basis of primary and secondary data analysis, that
the problem of providing adequate credit to small
farmers deserved immediate and adequate attention.
Rao79 observed that even the inadequate supply
(credit, fertilizer, pestiCides, storage and marketing
facilities) was not well distributed among the farmers
46
of various categories and between irrigated and
unirrigated areas. The small and marginal farmers were
having a low and sometimes even nil rate of access to
such supplies in the rural areas. This observation was
found to hold good by an empirical study conducted by
Thingalaya80
in Karnataka.
The PED study 81 which covered 16 $tates, 33
districts allover India in 1985 found that nearly 613
beneficiary households out of a total of 1170 households
selected faced problems in getting loans. Around 23 per
cent of the selected households experienced delays in
getting loans sanctioned. And another 20 percent of the
households complained that the bank branches catering to
their areas were located at a considerable distance from
their villages.
The NABARD study 82 which covered 60 blocks
and 30 districts in 15 states allover India and
branches of the financing banks and a sample of
122
1498
programme beneficiaries noted that the actual amounts
of subsidy and loan provided were relatively low. The
information collected from sample beneficiaries showed
that 50 percent of beneficiaries, financed for minor
irrigation schemes, found the amount of loan and subsidy
received inadequate to cover the actual investment cost.
47
Subba Ra083
demonstrated that the demand for
short-term production credit for both small and large
farmers was directly related to the current level of
input requirements and inVersely with the self financing
ability of the farmers, given risk and uncertainty. And
the supply of long-term institutional (cooperati.ve as
well as commercial bank) credit was a direct function of
asset (land) endowments.
On the basis of 'internal progress reports' on
Marginal Farmers and Agricultural Labourers (MFAL)
programmes and empirical studies carried out in Delhi,
84 UP and West Bengal, Pandey concluded that due to lack
of effective expansion of banking facility, and lack of
effective adoption of various programmes, the large
share of advantages had gone to the better-off section
among marginal farmers and agricultural labourers.
Mishra 85 . and others In their study conducted in Basti
district of Uttar Pradesh found that nearly 76 per cent
of the credit borrowed from cooperatives, 98 percent of
the credit borrowed from commercial banks and 95 per
cent of the Land Development Banks by the 100 farmers
selected have been spent for production purposes.
and
According
NABARD,87
to the studies conducted by PE086
the beneficiaries, to receive the
subsidized loans under IRDP, were selected mostly by the
48
village level workers and block level officials without
consulting the bank officials. This led to th.
misutilisation of loans by the beneficiaries. These
studies also found some cases of misappropriation of
subsidy amount by the lower level functionaries with the
connivance of the bank and block officials.
Precisely for this reason the CRAFICARD88
report, on the basis of the survey warned that if the
beneficiaries were not properly identified, the credit
would become a burden on those borrowed.
Mohana Ra089
in his study found that in
irrigated areas the loans borrowed from a RR8 were
almost completely utilised for productive purposes
utilisation was 98 %). However, Raju and 90
Patel
( the
in
their study on IRDP found that only 34 per cent of the
small borrowers utilised the assistance properly, and
nearly 22 per cent of the borrowers completely
misutilised the loans, and the remaining 44 per cent of
them partly misutilised.
Indira Hirway91 elaborately e~pl.ined how the
improper identification of beneficiaries led to the
misutilisation of loans by the rich in the rural areas.
Supporting evidence to this came from the PE092
study
which noted that as many as 302 out of a total of 1170
sample beneficiary households (26%) had an annual income
49
exceeding the poverty line limit (Rs.3500) at the time
of their selection.
According 93 to Dhawan what really tilted the
balance in the matter of income benefits per unit of
irrigation water (Publ ic canal) in favour of large
farmers was their superior access to all input".
irrigation, credit, agricultural extension services,
bureaucracy, education, cooperatives, etc.
A large number of studies found the problem of
non-eligible borrowers getting loans by submitting false
records to the credit institutions., Notable among them
are by Sinha and Jagdish Prasad94 (1980) and Rao and
95 Malya. Sinha and Jagdish Prasad in their study about
the special programmes implemented for the wsaker
sections in Musahari block in Muzaffarpur District,
Bihar found that the large bulk of beneficiary
households belonged to the richer sections of the
community and not to the poor sections. However, they
further noted that the programmes resulted in creatinQ a
positive impact on generating employment and increasing
earnings of those poorest sections of the society who
managed to get the loan assistance. Rao and Malya in
their study conducted in South Canara district in
Karnataka found that big farmers by manipulating the
land records availed loans meant for small farmers.
50
U) Impact of Credit 1. Dairy Loans
A large number of studies about the impact of
dairy loans on the small borrowers is available.
However, the methods they have followed to collect data
and the techniques they have used to analyse the
collected data are found to be weak and inadequate in
the sense~that they could not demonstrate clearly the
impact of dairy development alone on the social and
economic conditions of farmers as pointed by Sidhu96 in
his Rapporteur's report on 'Dairy Development and Bovine
Economy' • Another point is that most of the studies
have taken
neglecting
into account the case of small
the marginal, farmers and
farmers by
agricultural
labourers.
The following review takes into account only
the important studies which have analysed the impact of
dairy enterprise on the economic conditions of small
borrowers.
grouping
Further, the review has been done
these selected studies on the basis of
by
the
methodology followed to workout the impact of dairy
loans. The following are the major types:
a) Studies adopting inte~-temporal analysis.
b) Studies adopting cross-sectional analysis
c) Studies adopting a combination of both (a) & (b)
51
d) Studies comparing irrigated ar~a with
unirrigated area
e ) Studies using statistical tools like
production function, lin~ar discriminant
function, and cost-benefit ratio, to workout
the impact of dairy loans.
(a) Studies Adopting Inter-temporal Analysis
M ' h 97 15 ra,
This methodology
C ' 98 hlkara, 99
Rao,
has been
N 'd 100 a 1 U,
followed
Pawar
by
and
101 Subhash, SBI 102 , thl! PE0 103 and NABARO. 104
They
have worked out the differences in the income and
employment levels of the beneficiaries of dairy loans
between two periods, i.e., before and after the dairy
loan. In other words, they evaluated the U post
conditions of the selected beneficiaries in the lIght of
U ante conditions., By this way, they have attributed
the differences in the selected variables, if any, to
the daIry schemes. The NABARD study terms it as pre and
post-development income. IRMA studyl05 terms it as
'Then and Now' approach.
Chikara in his study conducted in six villages
of Hissar district (Haryana) found that the advances
given by the banks helped the selected households in
increasing the gainful employment and income.
52
An evaluation study of a scheme re1inanced by
Agricultural and Rural Development Corporation (AADC)
conducted by State 8ank of India (S8I) in Pondicherry in
1978 revealed that, of the total investment in dairy
activity, the 8ank's loan formed 55 to 67 per cent,
subsidy 25 to 33 percent, and borrowers' share 10 to 18
per cent among the differential size groups of farmers.
The gross return from dairy activity worked out to about
As. 125 per month per animal. The net surplus was Rs.
41.48 per animal, while it was only Rs. 3.98 in the pre-
loan period. Similarly, the dairy activity offered
employment for 22.15 man days per month in the post loan
period as against 12.95 mandays in the pre-loan period.
The study by NA8ARD found that the benefits
were not sustainable in the case of animal husbandry
schemes in general and the milch animals in partlcular.
Apart from the poor quality animals, the other reasons
for this state of affairs were death of animals (26 out
of 273 sample units) and sale of animals (31 out of 273
sample units).
The PEO study found a significant increase in
the income and employment levels of dairy loan
beneficiaries during the study period. The slmllar
conclusion has been arrived at by the other researchers
listed earlier through their studies conducted in
various locations at different points of time.
53
(b) Studies Adopting Cross-sectional Analysis
The second type of methodology, cross-
sectional analysis termed as 'with and without approach'
has been followed by Singh and 106 Das, Pandey and
107 Khanna, 108
Satpute, Singh and 109 Pandey, and Tej
Bahadur 110
and others. They have compared the income
and employment levels of beneficiaries with that of non-
beneficiaries, and the differences, if any, in the
selected variables have been attributed to the dairy
scheme. Almost all the studies found an improvement in
the income and employment levels of the beneficiaries
compared to non-beneficiaries.
According to Pandey and Khanna, due to SFDA
scheme, the average levels of all the socio-economic
indicators increased in the case of beneficiaries as
compared to the non-beneficiaries in the two districts
in Haryana, where the study was conducted. The findings
further revealed that the SFDA made a positlve lmpact in
transforming the bulk of non-viable weaker sectlons lnto
viable ones in both the districts.
Singh and Das used this 'Wi th and Without
approach' and attributed the observed differences in the
values of selected parameters between the cooperatives
(with) and the control villages (without) to Operation
54
Flood-I. They found that the income generatIon was mora
In the case of villages where the MPCSs were
functioning.
(c) Studies Adopting ~ Combination of Both ~ ~ (b)
A few studies notably by Agarwal 111 and SaInI,
Peter . 112 113 and SebastIan, and Kannathal analysed the
impact of dairy programmes on the economy of small and
marginal farmers by using inter-temporal, (comparing the
overtime situation) and cross-sectional (comparing at a
point of time) approaches. Agarwal and Saini concluded
that the SFDA brought a significant posItive Impact on
cropping intensity, farm investment, net farm income and
human labour employment on the small and marginal
farmers, who participated in the various programmes of
the agency.
Peter and Sebastian studied the impact of SFDA
assistance on the small borrowers and found that there
was a positively significant increase in the levels of
economic variables like net worth of farm, cropping
intensity and net profit per acre, due to SFDA
assistance. According to Kannathal though an increase
in the income and employment level was observed aftar
SFDA assistance, the standard of living of small farmers
had not improved perceptibly.
55
(d) Studies Comparing Irrigated Area with Unirrigated
In his study conducted In Parbhanl dlstrlct in
114 Maharastra, Satpute found that the lmpact of speclal
schemes implemented under MFAL programme was bett~r in
dry region as compared to the irrigated f"'eglon. A
115 similar conclusion was arrived by Mohana Rao when he
compared the impact of the RRB loans made in irrigated
116 area. Even the PED study, since It was conducted at
the All-India level, divided the study areas into four
categories namely, agriculturally developed areta,
agricul turally less developed area, areas with good
administrative infrastructure and areas with poor
infrastructure. Accordingly, the study found that the
incremental income in the case of animal husbandry
schemes was the highest in the areas wIth good
administrative infrastructure and the lowest where the
infrastructure was poor.
A study conducted by the AERC at Vallabbh
Vidyanagarl17 showed that the proportion of income from
dairying to the total farm income was higher in the case
of farmers with small holdings. Similar findings were
arrived at by many studies. For example, in a review
article, Mishra l18 stated that the introduction of dairy
enterprise on a small farm of 1.7 hectare could increase
56
the annual farm income from Rs. 5,692 to Rs.12, 275 and
the employment level from 4,016 man-hours to 4,412 man-
hours per year. On marginal farms also a similar
increasing trend could be envisaged in income and
employment. Further, Mishra noted that introductlon of
a dairy enterprise increased the incomes of small farm,.
of 2.5 hectares by 67 per cent, of the medlum farmers of
5.0 hectares by 32 per cent and large farmers of 10.0
hectares by 41 per cent.
(e) Studies Using Statistical Tools to Workout ~ Impact
of Dairy Loans
A few studies used statistical tools to find
out the impact of dairy loans. The AERC, Madras
evaluated th e dai ry schemes of SFDA in Tirunelveli
district (in Tami I Nadu) in 1979 by using production
function analysis 119 George and Chokshi,
120 calculated
costs and returns of dairying to analyse the lnvestment
worth in dairying. The same method was adopted by
George d S . 121
an rlvastava. Pandey and 122
Muralldharan
and Singh 123 and Pandey used an advanced statlstlcal
technique namely linear discriminant functlon analYSls
to know the impact of selected variables on the
viability of the farmers who borrowed agrlcultural
loans. The major findings of these studles were (,) the
57
returns from dairying were significantly influenced by
the amount spent on fodder and cattle feed, and (il) the
viability of small farmers was determined by the
cropping intensity and the value of inputs like
fertilizer used in the crop production.
By working out the rat" of return on
lnvestments made with the help of bank finance by the
big, medium, small and marginal farmers in u. P • ,
124 Shukla, found that the unit return on investment was
higher among marginal farmers followed by small farmers
and medium farmers. The rate of return on inveiitment
was the lowest among large farmers.
Impact of Credit Minor-Irrigation Loans
A few studies are available about the imp ac t
of minor irrigation loans on the
As observed by Pal,125
small and marginal
farmers. in India, several
researchers have touched upon different aspects of how
irrigation may contribute to agricultural production.
Many of the studies have adopted a simple production
function approach to show quantitatively how irrigatlon
raises agricultural productivity under the
paribus condition. Another set of studles has analysed
the impact of irrigation on cropping intensity and hence
(indirectly) on agricultural production. Some studles
58
have also discussed the role of irrigat10n in br1nging
about changes in cropping pattern and stability 1n
agricultural production. In accordance wi th the
objective of the present study, a brief review of the
available studies on the impact of minor irrigation
schemes undertaken by the small and marginal farmers
with the help of loans has been done in this section.
A study conducted in 126
Karnataka found that
though the irrigation facilities provided to the farmers
positively contributed to the increase in the output of
first crop, lack of credit facilities, among other
factors, inhibited raising of second and subsequent
crops ..
127 According to the NA8ARD study, 50 per cent
'of beneficiaries out of 158 beneficiaries f1nanced for
minor irrigation found the amount of loans and subsidy
received was inadequate to cover the actual 1nvestment
cost. However the minor irrigat10n sources created by
the loans increased the employment per benef1c1ary
household to 120 mandays. And the income generat10n was
decidedly better for minor irrigation in all the states.
Kulkarni128
analysed the returns to investment
1n minor irrigation by selecting four small farmers and
eleven big farmers in Kolhapur district who have
59
borrowed from ARDC Credit Project II of the Maharastra
Land Development Bank to dig well and to install
Pumpsets. He found that only 73 percent of the total
cost was met out of the loan amount. The cropping
intensity had increased, after the scheme was taken up.
As far as cropping pattern was concerned, a wide
difference between expected and actual positions of the
selected farmers was observed. Despite the fact that
farmers grew more cash-crops, the actual net income
realised by the farmers was considerably less than the
expected one.
129 Prasad conducted a post-utilisation ~tudy
on the advances to minor irrigation by a PLDB operating
in Channapatna Taluk of Bangalore District of Karnataka
during 1980. The sample was drawn from six villages of
the taluka covering 15 small and 15 big farmers who had
borrowed loans from the PLDB to dig new wells. By
comparing the post-loan situation with that of pre-loan
situation of the same farm, the study found dIstinct
changes in the cropping pattern after the well was sunk
by the selected farmers. The pre-loan per acre average
net income of small farmers was Rs. 370 and th is
increased to Rs. 2152 during the post-loan period. The
corresponding figures for big farmers were found lower
at Rs. 308 and Rs. 1056 respectively.
60
iv) Loan Repayment
A large number of studies and r~ports IS
available about the loan repayment problems of farmers
who have borrowed from cooperatives, commercial banks
and Land Development Banks. However, only a f~w
relevant studies are reviewed here keeping in mind the
scope of the present study.
A study team of RBI 130 noted that the 1 arge
amounts of overdues to the cooperatives was a standing
testimony to the wilful default and non-payment by some
of the borrowers from cooperatives who were mostly large
farmers.
A dh . 131 va an 1 . S study found that the repayment
performance of large farmers was poorer than th a t of
marginal farmers, implying thereby that part of theIr
funds could have been used for unauthorised purposes.
Sinha and Prasad (1982)132 in their study
found the repayment habits of 102 beneficiary households
selected as fairly poor. One of the reas.ons, according
to them, for poor repayment was that the schemes were
generally accepted as a 'dole' or relief programme by
the beneficiaries.
61
The 133 PEO study reported that in many areas
the percentage of overdues varied from 50 to 60 p&rcent.
It was as high as 70 percent in one of the selected
districts in uttar Pradesh which in real terms meant
that no instalment of loan had been repaid, besides
adjustment of subsidy.
A review of nearly 20 micro-level
conducted in various parts of India during the period
1967 to 1991 on defaults of institutlonal loans to
134 agriculture was done by Anandteerth and Basanna . On
the basis of the results of these 20 studies, the review
concluded that institutional loans to agriculture had
been defaulted by all the categories of farmers - both
wilfully and non-wilfully. The main reason for non-
wilful default was found as the fai lure of the
institutional loans to generate adequate income to the
borrowers to repay the loans promptly. And the major
reason for wilful default was found to be lack of
supervision on the part of the officials of the
financial institutions.
135 The CRAFICARD report characterlsed defaults
being, by and large, wilful arising from the lack of
will and discipline on the part of the cultivators. It
also mentioned that the State governments dominated as
they are by the landed interests, condoned wllful non-
62
repayment, prevented coercive steps from being taken for
the recovery of overdues and sometimes did even write-
off debts for all cultivators by paying the same out of
the eKchequer. It thus appears that excessive
politicisation and officialisation have been responsible
for the twin factors of uneconomic size and rising
overdues leading to the the economic non-viabillty of
PACs as a financial institution.
v) Viability of the Schemes/Loans.
A study sponsored by the Planning Commission
in 1972 136 went into the details of economic vlability
of farms in Udaipur district, Rajasthan. The study
found that operational holdings below two hectares were
economically non-viable and the economically viable size
of operational holding varied with soil condi tions,
cropping pattern and irrigation. However, the
definition of viability lacked precision in this study.
George and Srivatsava 137 analysed the
viability of a dairy scheme initiated by a bank in
Baroda district (Gujaratlin 1972. They used pay-back
period, net present value, internal rate of return and
benefit-cost
of the loans.
ratio analysis to determine the viabi llty
They observed that the dairy development
scheme was viable and feasible from the point of view of
63
both the direct beneficiaries (farmers and the bank) and
indirect beneficiaries (cooperative societies and the
Dairy). However, they did not analyse the viability of
big, medium and the small farmers and marginal farmers
separately.
Another study conducted by the Centre for
Management in 138 Agrlculture Ahmedabad in 1973 went
into the question of how small farmer holdings could
best be helped to become viable units based on the1r
existing holdings. By preparing a Farm Business Index
and by using a correlation matrix the study found that
the size of operational holdings, availabil1ty of
working capital, and intensity of cropping were a few
variables determining the viability of the farm. Here
the term viability was .interpreted as a "situation
which a small farmer household is capable of at least
maintaining the prevailing standard of liv1ng 1n a
particular region u• The study used the benchmark of
Rs.2,400 as the viability floor or the cut-off point to
divide the sample farmers into viable and non-viable.
Singh and 139
Pandey used the linllar
discriminant function analysiS to identify those factors
which would make the small farmers and landless farmers
a viable entity. For their study they collected data
from 71 non-beneficiaries and 22 SFDA beneficiaries from
64
four villages of Barara block in Ambala district of
Haryana for the year 1977-78. A viable small farmer was
defined as one who had positive net income after meetin~
all the farm and family expenses. They found that per
hectare fertilizer use,area under high yielding
varieties, operational size of holding and working
capi tal were the major factors which affected the
viability of small farmers.
140 Kurulkar,
feasibility analysis
in his study, adopted financial
to estimate the benefits of the
farm investment in new wells and pumpsets and tractors.
He adopted cost-benefit analysis to measure the
By financial feasibility of the selected projects.
preparing feasibility equations he tested the financial
feasibility of the selected projects, and found that all
the three schemes studied were financially feasible.
141 Gunasekaran also did financial Viability
analysis by using cost-benefit analysis and production
function analysis to know the impact of credit provided
to small
district,
farmers under SFDA programme
Tami I Nadu State, and found
in ThanJavur
that the
productivity of credit was high in the block where the
SFDA was in operation compared to a non-SFDA block.
The IFMR evaluation study142 used the concept
of incremental capital output ratio (leOR) to know the
65
impac:t of loans sanc:tioned under IRD Programme.
Ac:c:ording to this study, the ICOR c:ame c:lose to the
Planning Commission's assumption of 1.5, in the better
developed distric:ts only while in the c:ase of others, it
ranged between 2 and 3. This being the c:ase, the most
optimistic: projec:tion of incremental income c:ame to
Rs.2000, while the most pessimistic estImate worked out
to Rs.1,333 in 1984. By taking this result 143 Bagchl
argued that if the initial household income is Rs.4,800
then the gross income will range between Rs.6,800 and
Rs. 6,133 but as this does not take into ac:c:ount the
loan repayment amount the ac:tual probability of the
household c:rossing the poverty line would be low.
In their study conducted In Tamil Nadu,
144 Namashivayam and Balasundaram analysed the financial
performance of the agricultural-allied projects financed
under IRDP in 19B5-86. For this they randomly selected
a sample of 230 benefic:iaries (not classified) from four
districts. Out of this,60 benefic:iaries (26\0 were
financ:ed to undertake dairy scheme. The finanCIal
analysis showed that the mi lch an i ma 1 sc:heme was
financially feasible at 12 percent discount rate In
terms of both NPV and BCR criteria. IRR was estImated
to be 25 percent. It implied that it would be
financially desirable to invest in the milch anlmal
66
scheme so long as the rate of interest on milch animal
schemes is equal to, or less than 25 percent.
To find out the income generation under IRDP,
145 Padmanabhan used the data collected by concurrent
evaluation surveys on IRDP since 1985 at NIRD, Hyd~rabad
in respect of Andhra Pradesh. He has analysed the
changes in the total income of beneficiary through an
income Shift Matri~. The study found that the average
f ami I y income, which was Rs. 3284 prior to IRDP
assistance has increased to Rs. 4827. In other words,
there was an increase of 47 percent (or Rs. 1543) on an
average without allowing for price changes.
Research Gaps Identified from the Review of Literature
From the foregoing review it appears that many
of the studies are wanting either in terms of
methodologies or in terms of issues covered by them.
The following may be offered as important research gaps
IdentIfied on the basis of our review.
a) Many studies while analysing the impact Gf loans on
economic condition of borrowers looked Into the
question whether the income had increased or not
and did not focus attention on the changes In other
factors like employment and assets.
67
b) Most of the studies reviewed here were not able to
demonstrate clearly the impact of dairy or minor
irrigation loans alone on the income and employment
levels of small and marginal farmers and
agricultural labourers.
c) A very few studies analysed the financial viability
d )
e )
f )
of loans but failed to conduct such analysis,
scheme-wise, as well as across different classes of
borrowers separately.
Though the issue of effectiveness of c red i t
programmes to the small borrowers In relatIon to
their acceSS to other infrastructural facilities
and services in the rural areas was touched upon by
many studies, their treatment to
problem was found to be inadequate.
Very
role
few studies made an attempt to
of subsidies in improving
viability of the project.
this specific
identify the
the fInancial
The studies dealing with the changes In the
had economic conditions of small farmers who
borrowed institutional finance limited their
analysis to income and employment and did not
68
e~plain the changes in their farming practices like
input use, cropping intensity, irrigation
intensity, cropping pattern, etc. in detail.
g) Majority of the studies concentrated their analysis
on the issue of the utilisation and impact of loans
h)
on the small farmers and to a certain extent on
marginal farmers but very few studies took up these
questions with regard to agricultural labourers.
The problem of cattle insurance with respect to
dairying scheme adopted by small borrowers was not
touched by the studies reviewed here.
Therefore, there is need for a comprehensive
study on the role and impact of institutional credit to
the small and marginal farmers and agricultural
labourers. The present study is a modest attempt in this
direction.
69
Notes and References
1 Abdi, Al i Issa, Commercial Bankt; and Economic Development, New York, Praeger, 1977, p 1,
2
3.
Goldsmith, R Development, New
1969, p 390.
W, Financial Structure Haven, Yale University Press,
Schumpeter, Development, Press, 1949.
J A, The theorv of Cambridge, Mass: Harward
Economic Unlversity
4. Goldsmith, Q1h... cit., p. 408.
5 Adelman, Irma and Morris, Cynthia, $oci"ty, Politics ~ Economic Development: a guantltative Approach, Baltimore, John HopklnS Press, 1967, pp 118-23,
6 Came ron Rando (Ed. ) , Bank ing and Economlc Development: Some Lessons of History, New York, Oxford University Press, 1972, p.25.
7 Gerschenkron, Alexander, Economic Backwardness in Historical Perspective: a Book of E;s'lays, Cambridge, Harward University Press, 1962, pp 12-45
8 Money and Capital Washington: The
McKinnan, R.J., Development, Institution, 1973, pp89-117.
9 Goldsmith, ~ Cit.
ill Economic Brookings
10 Hugh, Patrick, "Financial Development and Economic Growth in Underdeveloped Countries",Economic Development and Cultural Change, (14)2, Jan 1966, pp 101-14, and
11 Shaw, Edward, Financial Deepening ~ Economic Development, London, Oxford University Press, 1973.
12 Schumpeter, ~ Cit.
13 Gerschenkron, OP.Ct.
70
14 Cameron, QQ...... Cit. p. 6.
15 Gurley J G and Shaw E S, Money ~ ~ Theory of Finance, Brookings, 1960.
16 Cameron, R, Banking ill Industrialisation: ~ Study History, 1969, p. 291.
the Early 6tag~s of ~ Comparatlve Economic
17 Abdi, Ali Issa, QQ......Cit.,
18 Engels F (ed.) Karl Political Publishers,
Economy 1971, P
Marx Vol
607.
Capital L ~ Critigue QL III, Moscow, Progress
19 Abdi, Ali Issa, QQ...... Citl., pp. 28-9.
20 Keynes, J M, The General Theory of Interest, and Money, Brace and World,
Employment. Inc., 1936.
21 Nurkse, Ragnar, QQ...... Cit.
22 Lewis Arthur W, The Theorv of Economic Growth, New York, Harper and Row, 1970, p. 266, and
23
Rostow WW, The Stages of Economic Growth, London, Cambridge, University Press, 1960, pp 39-45.
Cameron, Op.Cit., M~kinnan, QQ...... Cit., QQ......Cit.
and Shaw,
24 a) Von Pischke J Donald (Ed.),
D, Dale W QQ......Cit.
Adams and Gordon
b) Adams D W, Douglas H Graham, & Von Plschke QQ...... Ci t.
J D,
25 Gerschenkron, QQ...... Cit.,
26 A detailed account can be seen in Todaro, Mlchael P., Economlc Development ill the ThIrd World, New York, Longman, 1981, pp 23-55.
27
28
Belshaw, H, QQ......Cit.,
Baun, E L, Diesslin M G, & Earl 0 CapItal and Credit Needs ~
Agriculture, Ames, Iowa, USA, University Press, 1961.
71
Heady (Eds), ~ ChangIng Iowa State
29 Murray, W G, Agricultural Finance, Principles and Practice of Farm Credit, Ames, Iowa, USA, Iowa State College Press, 1949.
30 Gurley and Shaw, ~ Cit.
31 Schultz, T W, ~ Cit.
32 Hayami Y, and Ruttan V, ~ Cit.
33 Stevens, Robert, D, ~ ~
34 Bathrick David D, Agricultural Credit for Small Farm Development: Policies and Pr~ctices. Colorado, Westview Press Inc., 1981.
35 Ursula K Hicks, Development FinancelPlannlng Control, Oxford, 1965. P 58.
36 For want of space the list is not provided.
37 They are many and to name a few
a) RBI, Report of the Study Team on of Cooperative Credit Institutions, RB I, 1974.
Overdues Bombay,
b) RBI, Loan Policy and Procedural Arrangement ln Relation to the Institutional Credit System ln India, Bombay, RBI, 1976.
38 Important among them are:
39
il World Bank, Adoption of Agricultural Innov,Jtion ~ Developing countries: ~ Survey, World Bank Staff Working Papers, No. 542, 1982.
i i )
iii )
i v)
New FAD,
Approach 1964.
to Agricultural Credit, Rome,
World Bank, Rural Development: Sector Policy Paper, Washington, World Bank, 1975.
Singh, Landless No. 320,
Inderjit, Small Farmers and the ~ South Asia, World Bank Staff Paper February 1979.
Myrdal G. Asian Drama, New York, Pantheon, pp 1033-52.
1968,
40 lipton, Michel, (1977>, ~Cit.
72
41 Streeton, Paul and Lipton, Michel (Eds), The CriSIS ~ Indian Planning L Economic POlICY ~ ~ 1960s, Oxford, 1968.
42 Krishna, Raj, "Unemployment in India", Indian Journal of Agricultural Economics, 28(1) Jan-March 1973, pp 1-23, and "Small Farmer Development", Economic and Pol i tical Weekly, May 26, 1979, pp 913-8.
43 Nanjundappa D M "Rural-Urban Conundrum in Indian Planning", Indian Economic Journal, April-Junv, 1982, pp 1-18.
44 Quoted by G Raghava Reddy in "PolItIcal Banking and Rural Development", (Paper at a National Seminar on Bank Finance Development, held at Tirupati, India Ap r ii, 1984.
Economy of presented
and Rural on 7&8
45 Quoted in Malabika Das Gupta, "A Note On Grlffin"s Views on Innovation and the Small Farmer", The IndIan Economic Journal, 26 (4-5) AprIl-June 1979, pp. 67-73.
46
47
48
Lipton, Michel, (1976) QQ.... Cit ..
Rao, C H H, (1975), QQ.... Cit ..
Parthsarathy G, "Agricultural Development Small Farmers: ~ Study ~ Andhra Pradesh, Delhi, Vikas, 1971.
i!.nd New
49 Tendulkar, Suresh D, "Rural InstItutional Credit and Rural Development", Indian Economic ReView, 18(1), Jan-June 1983, pp. 101-37.
50 Ronald Tinnermelr and Chris Dowswell, Small Farmer Credit, Agricultural Development Council, Inc., New York, RTN-Working Report No.1, March 1973, P. 1 •
51 Jakhade V M and Gadgil M V, Productlon-andRepayment-CapaCIty-Oriented Lending for Farm Investment, RBI Bulletin, January 1970, pp 56-77.
52 Rostow., ~ Cit.
53 Kuznets, Simon, Modern Economic Growth: Rate, Structure and Spread, New Haven, Yale UniverSIty Press, 1966.
73
54 Lewis., QQ...... Cit.
55 Srara. The Political Economv of Rural Development, New Delhi, Allied, 1983, p. 6.
56 Rao, C H H, Technological Change and of Gains in Indian Agriculture. MalcMlllan, 1975(a).
DIstrIbution New DelhI,
57 Desai S M, Viability and Eouitv Objective9 ~ Institutional Credit for Agriculture, Ahmedabad, IndIan Institute of Management, 1978.
58 Shalla G S, "Peasant Movement and AgrarIan Change In IndIa", In Krishnarao et.al (Eds) Peasant Farming and Growth of CapitalIsm ill Indian AgrIculture, Vijyawada, Vishalandhra, 1984.
59 Shalla G S and Chadha G K, Green Revolut,on and the Small Peasant: ~ Study of Income DIstrIbutIon Among PunJab Cultivators, 1983.
New DelhI, Concept,
60 Dantwala M L "Technology, Growth and Equity In Agriculture", in Mellor J Wand DesaI G M IEds), Agricultural Change and Rural Poverty: VarIatIons ~ i:!.. Theme Qy Dharm Narain, BaltImore, Johns Hopkins, 1985.
61
62
Reserve Sank of IndIa, All IndIa Rural Review Committee Report, Sombay,1969.
Credit
Joshi and 1986,
PC, Marxism and other Essays,
p. 181.
Social Revolution ill IndIa New Delhi, Patriot,
63 Nanjundappa, D M, Development with SOCIal Justice, New Delhi, Oxford & ISH, 1976.
64 Joshi P C, QQ...... Cit., p 39.
65 Sardhan K Pranab, Land Labour and Rural Poverty Essays ~ Development Economics, New Delhi, Oxford University Press, 1989.
66 Rudra A, and Sardhan P "Interlinkages of Land, Labour and Credit Relations: An AnalYSiS of Village Survey Data in East India", EconomiC: and Political Weekly, February, 1978, pp 367-84.
67 Kurien C T, Poverty, Planning and Social Transformation, New Delhi, Allied Publishers, 1978.
74
68 Joshi, P C, Poverty, Land Hunger and Emerging Class Conflicts in Rural India, in Steve Jones, Joshi P C, Miguel Mormis (Eds) Rural Poverty and Agrarian Reform, New Delhi, Allied, 1982
69 Bhaduri, Amit, "Class Relations and the Pattern of Accumulation in an Agrarian Economy",Cambridge Journal of Economics, March 1981 and The Economic Structure ~ Backward Agriculture, New Delhi, MacMillan, 1984.
70 For more details, Vernon W, Ruttan, "Assistance to Expand Agricultural Production",World Development, 14 (1) 1986, pp 39-63.
71 National Commission on Agriculture: Interim Report on Credit Servlce to Small and Marginal Farmers and agricultural Labourers, New Delhi, 1971.
72 Mukhopadhyay Arun K, and Rao Somasekara Small Farms Resource Use and Technology: A ~ Maharashtra, Hyderabaed, NIRD, 1980.
VBRS, Study
73 Patel K V, Farm Structure and Resource Use in Drought Prone Area, NIBM, Bombay, 1978, P 19B.
74 Hadimani R N, The Politics ~ Poverty, New Delhi, Ash i sh, 1984.
75 Singh R I, Prasad, V, Dmprakash and Singh R K, "Borrowing Behaviour of Small Farmers in SFDA Project, Fatehpur, UP", Indlan Journal of Agricultureal Economlcs, 30(3), July-Sept, 1975, p. 247.
76 Reserve Bank of India, Committee to Review Arrangements for Instltutlonal Credit for Agriculture and Rural Development (CRAFICARD) Chairman B Sivaraman, Bombay, RBI, 1981.
77 Mohana Rao Agricul ture", No 14, 1980, P.
J, "Interest Rates Cambridge Journal 159.
In ~
Backward Economics,
78 Rosh an Singh, Balishter and Singh R K, "Flow of Institutional Credit in Agrlculture (WIth Speclal Reference to Commerclal Bank's FInance), Agricultural Situation iQ India, December 1980, pp 675-9.
75
79 Rao V K R V in the Introduction to the book Role of Irrigation ~ the Development ~ India's Agriculture, IJAE Seminar Series No. XIII, IJAE, Bomb ay, 1976, P X I X •
80 Thingalaya N K, Marainal Farmers and Agricultural
81
82
Labourers ~ South Kanara District: Economic Analy~is. Manipal, Syndicate Bank, 1976.
Government Programme I1Evaluation Programme ll
t
of India, Planning Commission, Evaluation Organisation (PEO),
Report on Integrated Rural Development New Delhi, Planning Commission, 1985.
National Bank for Development (NABARD), IRDP", Mimeo, Bombay,
Agriculture and Rural "Study of implementation of NABARD, 1985.
83 Subbarao K, "Institutional Credit, uncertainty and Adoption of HYV Technology: A comparison of East UP wi th West UP", Indian Journal Q!. Agricultural Economics, 30(1), Jan-March 1980.
84 Pandey J M, "Development Programmes for Marginal Farmers and Agricultural Labourers: An Appraisal", Social Action, 27(1), Jan-March, 1977, pp 53-71.
85 Mishra,JP: Singh R I; Singh G N and Pandey K N "Role of Farm Financing Institutions in IRDP (A Case Study)", Indian Journal of Agricultural Economics, 32(3), July-September 1977, p. 164.
86 PEO, ~ Cit. P. 119.
87 NABARD, ~ Cit., p.l0.
88 CRAFICARD, ~ Cit.,
89 Rao, Mohana, "I mpact of Programmes on Ta rg e t Groups Case study of RRB", Indi an Journal 9i Agricultural Economics. 35(4), Oct-Dec 1980, PP 73-77.
90 Raju J Band Ashok A Patel, "Utilisation of Assistance Under IRDP" , Indian Cooperative Review, 1 9 ( 2), Jan 1982, p P 181-190.
91 Hirway, Indira, "Garibi Hatao: Can IRDP Do It?", Economic ~ Political Weekly, 20(13), March 30, 1985, pp. 561-4.
92 PED, ~ Cit., P 162.
76
93 Dhawan B D, "Diff.rential Income Impact of Public Canal Irrigtion in Maharashtra" in Niranjan Pant (Ed) Productivity and Equity iu Irrigation Systems, Ashish, New Delhi, 1984, pp 138-9.
94 Sinha S P and Jagdish Prasad, "Special Programmes for Weaker Sections: An Evaluation (A Case Study of Programmes in Musahari Block, District Muzaffarpur, Bihar)", Indian Journal of Agricultural Economics, 35(4), Oct-Dec 1980, Conference Number, pp 42-49.
95 Rao V G and Paramjit Malya~ Agricultural Finance ~ Commercial Banks, New Delhi, Ashish, 1980.
96 Sidhu D S, "Rapporteur's Report on 'Dairy Development and Bovine Economy", Indian Journal of Agricultural Economics, 30(3), July-September, 1975.
97 Mishra G P, "Distributional Effects of Rural Development Strategies: A Case Study, Economic and Political Weekly, Review of Agriculture, 14(39), Sept 29, PP A-86 to A-92.
98 Chikara, "Impact of Institutional Credit on Weaker Sections", Kurukshetra, 26(5), Dec.l, 1977.
99 Rao, Srinivasa V. "Financing of Small Farmers - A case study of a few small farmers 1n Coimbatore District, Tamil Nadu", Indian Journal of Agricultural Economics, 30(3), July-Sept 1975, p. 276.
100 Naidu L K, "Financing of weaker sections by commercial Banks", (paper read at a National Seminar ~ Bank Finance and Rural Development held at Tirupathy, India on 7& 8 April 1984.
101 Pawar, Jagannatharao Rand Subhash R, "Impact of Lower Interest Rate Finance on Economic Conditions of Rural Weaker Section,"Indian Journal 9.i. Agricultural Economics,37(3), July-Sept. 1982, pp. 265-72.
102 State Bank of India, Dairv Development 9.i. Pondicherry: An Evlauation Study 9.i. ~ Scheme Refinanced ~ ARDC, Evaluation and Monitoring Cell, Central Office, Bombay, 1978.
103 PED, ~ Cit.
77
104 NABARD, ~ Cit.
105 Singh, Katar, and Das Mukunda, Impact QL Opqration Flood II the Village Level, Research Repol't, Institute of Rural Management, Anand, <IRMA), July 1982.
106 Singh, Katal', ~ Cit., 1982.
107 Pandey U K, and Khanna SS, "An Economic Evaluation of SFDA for Weaker Sections in Haryana", Indian Journal of Agricultural Economics, 35(4), Oct-Dec, 1980, pp 49-58.
108 Satpute T G, "Impact of Kurukshetra, 26(12) March 16,
MFAL Programme", 1978, pp 17-9.
109 Singh JK and Pandey U K, "Discriminant Function Analysis of Small Farmers and Landless in India", Journal of Agricultural Economlcs, 32(2) May 1981, pp 211-17.
110 Tej Bahadur,Veeraswamy S and Parthasarathy P B, "Economic Aspects of Small-Scale Farming", Indian A
Journal of Agricultural Economlcs, 30(3) July-Sept 1975, p 245.
111 Agarwal N L and Saini G P, "SFDA-Impact on Economy of Small and Marginal Farmers RaJasthan", CooperatIve News Digest, 29(10), 1978, pp 164-66.
the in
Oct
112 Peter A, and Sebastian, "Impact of SFDAA Assistance on Small Farmers in Thuraiyur Block of Tl'ichIl'apalli Distl'ict, Tamil Nadu" Indlan Journal ~ Agricultural EconomIcs, 35(4), Oct-Dec 1980, p. 83.
113 Kannathal V E, "Impact of SFDA Programme on Income Distribution of Weaker Section: A Case of Enathirimangalam VIllage, South Arcot District, Tami 1 Nadu", Indian Journal !?.i. Agncul tural Economics, 35(4), Oct-Dec 1980, p 87.
114 Satpute. ~ Cit.
115 Rao, Mohana, ~ Cit.
116 PEO, ~ Cit.
78
117 Patel A Rand Jodha N S, Economic Relationship between Crop Farming and Dairying in ~ Developing
118
119
120
Area (Mimeo), AERC, Vallabbh Vidyanagar (Gujarat), 1979.
Mishra SEDME,
S P, "Developing 10(2) June 1983.
Dairy Entrepreneurs",
Agro-Economic Research Centre, Evaluation in Tirunelveli District. Madras, Tamil AERC, 1979.
gi. SFDA Nadu
George P Decisions Monograph,
Sand Chokshi S ~ Farm Level, No.66.
N, Dalry Development Ahmedabad, 11M, CMA
121 George P Sand Srivatsava, "Institutional Finance for Dairy Development", Indian Journal of Agricultural Economics, 30(3), July-Sept, 1975, pp 90-96.
122 Pandey V K and Muralidharan, "An Application of Discrlminant Function in Agricultural Finance", Indian Journal of Agricultural EconomiCS, (32), 1977, PP 41-51.
123 Singh J and Pandey U K, ~ Cit.
124
125
Shukla P Savlng) at A II ah abad,
C, Liguidity Farm Household 1982.
Management (Credit and Level ~ East UP, AERC,
Pal S P, Contribution of Irrigation to Agricultural Production and Productivity, New De I h " National Council of Applied Economic Research (NCAER) , 1985, p.3.
126 Quoted in, Indian Soclety of Agrlcultural Economics (ISAE), Role gi. Irrigatlon ~ ~ Develooment of India's Agrlculture. Bombay, Seminar Series, XI I I, ISAE, 1976.
127 NABARD, ~ Cit.
128 Kulkarni B N, ~ Study ~ Return, from Investment in Minor Irrigation, Bombay, Natioal Cooperatlve Land Development Banks Federation (NCLDBF) Ltd., 1981.
129 Prasad, J V L, ~ Post-utilisation Study Advances to Minor Irrigation ~ LDBs, Bomb ay, 1981.
79
~ ~ NCLDBF,
130 Reserve Bank of India, Report of the Overdues of Cooperative Credit Bombay, RBI, 1974.
Study Team on InstitutiOn$,
131 Avadhani V A, "Rural Retrogression and Institutional Finance", Economic and Pol itical Weekly,14(26), June 30, 1979, pp A75-84.
132 Sinha S P and Jagadish Prasad, "Impact of Farm Subsidies on Productivity, Income and employment in Bihar (A case study in Musahari Block, District Muzaffarpur, Bihar)", Indian Journal of Agricultural Economics, 37(3), July-Sept 1982.
133 P E 0, ~ Cit., P 121.
134 Anandteerth, Kittur and Basanna H, "A Review of Some Micro-studies on Defaults of InstItutional loans to Agriculture", Land Bank Journal, 31 (1),
Sept 1992, pp 53-5.
135 RBI, CRAFICARD, 1981, ~ Cit.
136 Tandon B K and Murdia B S, Economic Vlability of Farms in Udaipur District (Rajasthan). (Report of a Study Sponsored by the Research Programms Committee, Planning Commission, Government of India), New Delhi, Jain Brothers Publications, 1972.
137 George and Srivatsava, ~ Cit., 1975.
138 Centre for Management in Farmers: Problems ~
Development, Ahmedabad, IMM 1973.
Agriculture, Small Possibllities of Monograph No. 34,
139 Singh and Pandey, ~ Cit., 1981.
140 Kurulkar R P, Agricultural Finance ~ a Backward Region, Bombay, Himalaya, 1983.
141 Gunasekaran S, Small Farmers and Institutional· Credit, New Delhi, Ashish, 1985.
142 Institute for Financial Management and Research, 'An Economic Assessment of Poverty EradicatIon and Rural Unemployment Programmes and theIr Prospects', Mlmeo, Madras, IFMR, Aprll 1984.
80
1-13 f).1C)cl"lCC, SandcC'p, "Poverty Allcvlatlon Programmes
1 .~ ·1
, .. . "')
In SI'ventl1 Plan: An Appraisal", Econ~ and f.'~!:lJLl.Lr:"'-L \oJ.!'~_, 22 (~ ), J an 2~, 1987, pp 139-48.
t J .1 m .1 <:, 1 v ol Y .) m
t 111' R I ._-, k
"SubS1dy 111 Agr1cultural
P T' () J I' C t '.-, : n ilprll-June
I) ilnd Bal~sundaram 5 K, Preference 01 Allied SenC:,lllvlty AntilysIs",
1909, f'p 89-103. t1argln, 21(3),
F .-1 cl r:i .1 rI ol t) h .1 n r'j ,
! G pP , 1~~.!""'D_..!l.L l'~';(', l}:(,--C~t).
Income GeneratIon Process 9_~ f3~~~ ~~ D {"' v (' I op m r nt, 9 ( 1 1 \
81
under Jan
CHAPTER III
THE STRUCTURE AND GROWTH OF RURAL INSTITUTIONAL CREDIT IN INDIA
The history of rural credit in India may be
said to be the history of efforts to institutionalise
it. The reasons and purposes behind these efforts were
different at different times. In this Chapter, at the
first instance, the changes that have taken place in the
structure (implying an institutional framework) of rural
over the years have been briefly explained.
Secondly, a brief note on the special efforts taken both
by the RBI and Government of India in the field of rural
credit has been given. Thirdly, the institution-wise
growth of number of banks/branches, amount advanced as
well as the distribution of these loans among different
category of borrowers and the problem of overdues are
analysed. And finally, the efforts made to bring the
rural credit to the poor in different phases are
outlined. While doing so, the relevant information and
data taken from the sources like RBI publications and
Reports, publications of NABARD, Planning commission
Reports and Statistical Handbook of Tamil Nadu, 1991 are
consulted and used.
82
Rural Financial Market
A rural financial market can be defined as an
institution that provides continuous linkages between
suppliers and users of funds in the rural areas. It
encompasses all transactions in such financial
instruments as currency, bank deposits, savings with
post offices, loans, mortgages, bonds, corporate
securities, and non-monetary barter transactions which
are quite common in rural India. A rural flnancial
market comprises the capital market, credit market and
money or funds market and is a segment of the overall
financial market that pertains to rural sectors. As
transactions take place between buyers and sellers of
financlal instruments, the rural financial market
includes all those agencies which deal with purchase and
sale of these instruments.
The rural financial market performs two major
functions: mobilisation of rural savings and allocat ion
of such savings for competing uses by way of lendlng.
Structure of Rural Financial Market
The rural financial market conslsts of two
distlnCt segments: (il Organised or formal segment
(institutional) and ( i i ) Unorganised or lnformal
83
segment (non-institutional). While the formal segment
functions within the provisions of the Indlan Banking
Companies Act (1956) and maintains accounts which are
open to audit and regular inspection, the informal
segment operates outside this Act. The informal segment
consists of indigenous banks, nidhis, chit funds, and
professional and non-professional money-lenders. These
sources are also known as non-institutional agencies.
The formal segment consists of the Reserve
Bank of India (RBI), National Bank for Agriculture and
Rural Development (NABARD), Industrial Development Bank
of India (lOBI), Publlc and private sector commercial
banks, Regional Rural Banks (RRBs), Land Development
Banks <LOBs), State Cooperative Banks, Distrlct Central
Cooperative Banks, Primary Agricultural Credit Societies
(PACS) etc.
RBI is responsible for overall monetary policy
and provides accommodation to NABARD and lOBI for
agriculture and industries respectively. NABARD In turn
provides refinance to the commercial banks including
RRBs, Cooperative Banks and Land Development Banks. The
refinance from NABARD is distributed to the rural
entrepreneurs through two and three tier Cooperative
structures respectively for long-term, short-term and
medium-term lending. In the case of commercial banks
and RRBs the refinance directly flows to the users.
84
Growth of Institutional Credit in India
Modern Banking in India commenced with the
opening of a limited number of banks by British Agency
Houses, mainly in the port centres and for financing of
trade in raw-materials needed for British industries.
It was only in the first quarter of the 20th century
that Indian capital and business made their debut into
the banking sphere, that too into the prestigious
sectors of commerce and industry, quite befitting the
nomenclature of commercial banks. The Indian commercial
banking system grew with a large number of small and
very small banks and a small number of relatively larger
banks. These banks were, in their earlier decades quite
different from the type of traditional banks. There was
no banking regulation by the government and there was no
central banking institution. The Reserve Bank of India
was established only in 1935. A Banking Companies
(Inspection) Ordinance was promulgated in 1946 and a
full-fledged Banking Regulation Act was passed only 1n
1949.
The Rural Banking Enquiry Committee ( 1950)
recognised that the need of the rural areas for finance
was considerable and this could be met by developing a
variety of credit institutions in the cooperative
structure (e.g., credit societies, multi-purpose
85
societies, marketing societies and land mortgage banks).
However, the emphasis was not placed on commercial banks
to extend their direct credit to rural areas.
The All-India Rural Credit Survey, conducted
for the year 1951-52 revealed the dependence of rural
households for credit, agency-wise. Accordingly,
households
cooperatives
the
per family
institutional
borrowing of rural
sources (government,
from
and
commercial banks) was only a mere 7.3 per cent to the
total borrowings whereas the non-institutional sources
(professional, and agriculturist money-lenders, traders
and landlords) supplied the lions share of 92.7 per
cent. This startling finding made the government to
realise the fact that in the sphere of rural credit the
first step was to identify, organise and equip the most
suitable institutional agency. For this purpose The
All-India Rural Credit Survey Committee (AIRCSC) was set
up in 1952 under the auspices of Reserve Bank of India
(RBI) to make comprehensive recommendations in these
regards and allied matters. (Just then the First Five
Year Plan was introduced and the Community Development
Projects were launched in 1952 with the prime objective
of eradicating
rural India).
appropriately
poverty, disease, and illiteracy from
AIRCSC in its report (1954),
and imperatively in tune with the
86
integrated development approach of the Community
Development Programme, proposed an outline for an
integrated rural credit service. AIRCSC was of the
opinion that cooperatives at the village level were the
suitable agencies for institutional credit, and there
was no alternative to them. Refraining from defining
any positive role for commercial banks in direct rural
credit, but amplifying the role recommended by the Rural
Banking Enquiry Committee, AIRCSC recommended the
conversion of Imperial Bank of India into State Bank of
India (SBI) and assigned to the SBI a prominent role of
being responsive to the needs of cooperative
institutions concerned with credit, particularly in the
areas of marketing
produce.
and processing of agricultural
AIRCSC also recommended organisation of large
sized primary cooperative credit societies, capable of
operating as viable business units, covering groups of
villages with reasonably large membership and share
employing full-time paid secretaries. capital base,
Following this recommendation quite a large number of
large-sized societies were formed. Later, in November
1958, the National Development Council advocated the
organisation of primary credit societies wlth village as
the basis.
87
On the basis of the recommendations of AIRCSC,
SBI came into existence on 1st July 1955, carrying a
statutory obligation of opening not less than 400
branches within five years. Between July 1955 and June
1960, SBI opened 416 branches, out of which 274 were
located in rural and semi-urban areas.
RBI set up the National Agricultural
(Long-term Operations) Fund in 1956 and the
Agricultural Credit (Stabilisation) Fund in
Credit
National
1965 as
recommended by the AIRCSC. The latter Fund was to
provide financial assistance to cooperative banks to
enable conversion of short-term loans into medium-term
loans consequent on the borrowers becoming unable to
repay the short-term loans due to natural calamities
causing crop failures.
An evaluation of the changes in the credit
delivery pattern, after the All-India Rural Credit
Survey (1951-52), was made by the All-India Rural Debt
and Investment Survey (AIRDIS) in 1961-62, ie, after a
decade.
sector
This AIRDIS found that the share of organised
in the provision of rural credit had increased
from 7.3 per cent to 19.7 per cent during this ten year
period thanks to the five-fold increase in the share of
co-operatives from 3.1 per cent to 13.5 per cent; but
the shares of government and commercial banks remained
88
the same (Table 3 . 1 ) • HOl')P'J(-r, t ~l. c· r. r ~ '. ,: ~ ( • f' -- •
con t 1 r,ur(~ 'cO
domInant component des PIt (> 1 t-.- d (> ell n (. f r c:.
cent ln 1951-52 to 80.3 per cent In 1"61-~::.
Tab 1 e 3. 1
Sources of Rural CredIt
Year 51 No Source
1 c: 6 I - t: 2
I .
2.
3.
4.
5 .
Source:
Government 3.3 3.3
CooperatIve Credlt SOcIetIes 3. ISc5
CommercIal Banks 0.9 0.9
Moneylenders 90.9 6 f <~ , . ~
Others I .8 1 -, 9
Report of the All Indla Rural Credlt Revlcw Commlttee, 1969, p. 100.
The of the above 6U r '·'('y t II I'
Indlan government and the RBI to InItIate varIOuS ~t{'r:'_\
to strengthen the instItutIonal setup 1n the oj
rural fInance.
The Agricul tural Ret Inance Corpcr<';'lC~·.
came into eXIstence on 1st July 1963, by t.::::: :. c '
89
Parliament, as a separate institution in RBI, with an
obje~tive of granting medium and long-term credit by way
of refinan~e or otherwise for the development of
agri~ulture, including animal husbandry, dairy farming,
pisci-culture, and poultry farming. State Cooperative
Banks, Central Land Development Banks, and Scheduled
Commer~ial Banks who were members of ARC were eligible
for assistan~e from it in the form of refinan~e. <This
~orporation was renamed as Agricultural Refinance and
Development Corporation (ARDC) subsequently in November
1975) •
In 1964, the Informal Group on lnsti tutlonal
Arrangements for Agricultural Credit indire~tly endorsed
the 1 imi ted role of ~ommer~ial banks in agrl~uJtural
credit. However, the se~ond half of the sixties
witnessed several important developments and events in
the sphere of agri~ulture and rural
introdu~tion of New Agri~ultural
~redlt like
1 Technology
the
and
nationalisation of 14 major ~ommer~ial banks ( 1969)
whi~h have seen an in~reasing parti~ipation of both PACS
and commer~ial banks in the field of agri~ultural and
rural ~redit. And later in 1975 the Regional Rural
Banks (RRBs) came into existen~e.
Before looking into the institutionwise growth
and expansion of ~redit in rural areas, certain special
90
efforts that were taken up after 1968 both by the
government of India and RBI are outllned ln the
the following paragraphs. This is done to drive home
point that the process of institutionallsation of rural
credit was not smooth. In otherwords, the relieving of
rural poor and the farmers from the clutches of non-
institutional sources like money-lenders was a Challenge
which warranted a multi-dimensional approach.
Special Efforts in the Institutionalisation QL Rural
Credit in India
(i) Bank Nationalisation
With the introduction of new technology in
agriculture the demand for credit had risen manifold
during the late sixties. It was felt that cooperative9
alone could not cater to the credit needs of the
farmers. Therefore, to meet increased demand and for
the commercial banks to play an increased role in the
development of rural economies, 14 major scheduled
commercial banks were nationalised in 1969 (si>< more
banks were nationalised in 1980). Nationalisation was
meant to ensure that no viable productive endeavour
should falter for the lack of credit support. It was
designed to make the system reach out to small men and
to remote rural areas.
91
(ii) Lead Bank Scheme (LBS)
To adopt the strategy of area approach, the
LBS was introduced shortly after nationalisation
(Dec.1969l. The emphasis under the LBS was to make
banks an important instrument of local development by
entrusting individual lead bank with the responsibility
to identify growth centres, assess deposit potential,
identify credit gaps and evolve a coordinated programme
of credit deployment in consultation with other banks
and credit agencies in the area of its operation.
allotted
All the districts in the country had been
to specific public sector banks and a few
specific private sector banks. The lead bank
constituted consultative committees at district and
block levels. The district level committee consisted of
the collector as the Chairman, the representative of the
lead bank as the Convenor and representatives from all
commercial banks, cooperative banks, RRBs, term .ending
financial institutions and developmental agencies in the
fields of agriculture, small scale industries etc.,
besides the concerned district level departmental heads
of the state government. This forum was to exchange
views and information about lending to the priority
sectors, identifying the bankable schemes and evolving
methods of financing them in a coordinated manner.
92
( iii) District Credit Plans
A district credit plan is a blueprint of
ac t ion by banks and other financial instltutions for
bringing about an overall development of the district.
These plans identify the economic activities to be
financed, prepare bankable schemes for them, and
estimate credit demand under each bankable scheme.
( i v) Priority Sector Lending
At the time of nationalisation of major banks
the bulk of their business was concentrated in urban and
metropolitan areas, catering to the needs of large and
medium sized industries. Consequently agriculture,
small scale industries, etc., did not receive adequate
attention. Under the priority sector lending the banks
were supposed to lend a specified proportion of their
total lending to specifically identified sectors like
agriculture, small scale industries, retail trade and
small business.
RBI provided refinance facilities for banks at
concessional rate in order to enable them to lend to
priority sectors. The priority sector lending should
constitute 40 per cent of aggregate bank advances,
according to RBI instructions.
93
(v) Differential Rate of Interest (DRII Scheme
The DRI scheme was introduced ln 1972. Under
this scheme, banks were to lend to weaker sections of
the society at a concessional rate of 4 per cent per
annum. The basis of selection of beneficiaries under
the scheme was the weak economic status of the
borrowers, that is, those who did not have any tangible
security to offer and also were not able to produce a
security. Also an income ceiling was fixed annual
income of a borrower should be below Rs.2000 in rural
areas and below Rs. 3000 in urban areas. One per cent
of the total bank credit was earmarked for this scheme,
and ntleast 40 per cent of the credit granted under the
scheme was required to be given to the eligible
borrowers from scheduled castes and scheduled tribes.
(viI Village Adoption Scheme (VAS)
According to this scheme, a relatively
backward village is adopted by a financial/developmen
tal/voluntary agency with an objective of attempting an
overall development of that village. The concept behind
adoption of a village is to provide a supportive
organisation
developlmental
which
efforts
could
in the
94
coordinate
region.
all
The
local
the
parent
institution has
direct assistance
dual role to play;
to the village
first, to provide
development, and
secondly, to playa role of co-ordinator between various
Governmental, Financial and Voluntary agencies to see
that benefits flow in a right direction towards the real
target group without any leakage. The VAS is based on
area approach' and its objective is to develop the
village economy in all its aspects in a phased manner.
This scheme was formulated in 1973-74.
The VAS was originally adopted by the State
Bank of India but later other banks have also adopted
it. As per the data available at the end of June, 1988
banks had adopted 1,81,842 villages and financed 12.82
million accounts involving an amount of Rs. 2,557 crores
as against 1,28,111 villages and 4.19 million accounts
involving Rs 1250 crores, at the end of June 1982. With
the implementation of the Service Area Approach, the VAS
has been subsumed under the new approach from 1st April
1989.
(vii) Regional Rural Banks
The Banking Commission in its report in 1972
identified
commercial
the possibility of
banks in rural areas.
95
further expansion of
Keeping this in view
the government appointed a Working Group On Rural Banks
under the Chairmanship of Narasimham to examine the
proposed setting up of rural banks. The worklng group
recommended the setting up of state-sponsored regional-
based and rural-oriented commercial banks. The major
objective of the new institutions was to mobilise
resources from the region and deploy them wlthin the
same region. Atleast 50 per cent of the lending should .
be to provide productive credit to small and marginal
farmers, landless labourers, rural artisans and other
weaker sections of the society. Based on the
recommendations of the group, the first batch of six
RRBs was set up in October 1975.
(viii) Integrated Rural Development Programme (IRDP)
Taking into consideration the weaknesses of
the previous developmental programmes, the Government of
India launched the IRDP in 1978-79. This programme is a
synthesis of the strategies tested and the experience of
implementing various special programmes llke SFDA.
Drought Prone Area Programme (DPAP) and Marg~n~l Farmers
and Agricultural Labourers Programme (MFAL). The main
objectives of this programme ( I RDP ) were to raise
fami lies in the identified target groups above the
poverty line; and to create substantial additional
96
employment opportunities in the rural sector. The
target group consists of the poorest among the poor in
rural areas-broadly speaking small and
farmers, agricultural and non-agricultural
marginal
labourers,
rural artisans and craftsmen, scheduled castes and
scheduled tribes. The target groups from among these
categories were identified using the norms prescribed by
the Ministry of Rural Reconstruction, Government of
India. Then they were given assets like milch animals,
work bullocks, sheep and goats to generate income with
the help of both financial institutions like commercial
banks, PACS and RR8s and developmental departments.
(i~) National Bank for Agriculture and Rural Development
(NA8ARD)
NA8ARD has been established on July 12, 1982
to take up the role of a leader bank for the entire
rural credit system in the country. It has been set up
by merging the Agricultural Credit Department of the R8I
and the Agricul tural Refinance and Development
(ARDC). It is thus T"esponsible for Corporation
development,
coordination,
policy, planning, operational matters,
monitoring, research, trainlng and
conSUltancy relating to rural credit. It also provides
refinance to cooperatives, commercial banks and RR8s not
97
only for production but also for marketing and
distribution arrangements.
(x) Service Area Approach (SAP)
gather
The RBI conducted a survey in November 1987 to
requisite feedback on rural lending to find out
as to how far the stated objectives of bank credit had
been realised, viz., i) increasing the
production,
productivity,
popUlation.
(ii) enhancing
and (ii i) raising the
After this survey,
the
income
as a
agricultural
agricultural
of the rural
follow-up, a
seminar was organised by the RBI in January 1988. At
this seminar, the issues relating to the rural credit
delivery system arising out of the field surveys were
discussed. An important recommendatlon of the seminar
was that with the large network of rural and semi-urban
branches of commercial banks it was high time that
specific area assigned to each of such bank branches be
referred to as its I'service area". The service area of
a branch should be mutually exclusive from the service
area of other branches of commercial banks.
Following the seminar, the RBI decided to implement the
service area approach for rural and seml-urban branches
of commercial banks, and issued detailed instructions.
This is how the SAA has come into being and has been put
98
to implementation with effect from April 1 , 1989.
The SAA has five important components as followsl
1 • Identification and allocation of service area for each bank branch.
2. Survey of villages in the Service Area for assessing the potential for lending activities and identification of beneficiaries for assistance.
3. Preparation the service
of the credit plan on annual basis area by each branch.
for
4. Coordination between credit institutions on the one hand and field level development agencies on the other on an ongoing basis for the effective implementation of credit plans, and
5. System of continuous monitoring of progress in the implementation of plans.
Under the SAA, a total of 6,18,216 Villages
have been allocated amongst 42,158 branch offices of
publlc sector banks, Regional Rural Banks and private
sector banks.
These were certain policies and schemes which
were pursued and implemented from time to time in the
field of rural credit in India. What follows in the
following pages is a brief account of the nature and
growth of rural credit agency-wise, in India In general
and wherever possible in Tamil Nadu in particular. For
this purpose four major credit institutions have been
taken into account, viz; PACSs, Land Development
Banks, Commercial Banks, and Regional Rural Banks.
99
Institutionwise E~pansion of Rural Credit
B..... Cooperatives
The cooperative movement in the field of
agricultural credit was started in the beginning of the
current century and Over time the three tier credit
structure for short and medium term credit and the two
tier structure tor long-term credit were evolved in
different states.
The short-term (upto 15 months) credit and
medium-term (15 months to 5 years) credit are provided
by the Primary Agricultural Credit Societies (PACSs)
which operate at the village level, Central Cooperative
Sanks (CCSs) at the district level and the Stat!!
Cooperative Sank (SCS) at the apex of the cooperative
credit structure. The long-term (5 to 25 years) credit
is provided by the Primary Land Development Sanks
(PLDSs) at the base and State/Central land Development
Sanks (SLDSs) at the top in the two-tier structure.
The progress of PACS in terms of number of
societies, membership, advances made and also the
problem of overdues is briefly discussed here.
Due to continued efforts at revltalisation and
reorganisation of PACSs to form viable ones their number
has declined steadily over the years. However, the
100
membership and the amount sanctioned as loan to
agriculture have registered a continuous increase during
the period 1950-51 to 1988-89 (Table 3.2).
Table 3.2
The Performance of PACS in India
Year No. of Member- loans loans Loans Perc en-socie- ship and Out- Over- tag" of ties <l akh) advan- stand- due overdue (I akh) ces ing (Rs In to out-
(Rs in IRs in crores) standlng cron~s) crores)
1950-51 1.15 51 23 1B 6 20.69
1960-61 2.12 170 203 218 44 20.18
1970-71 1.61 304 580 784 322 41.07
1980-81 0.94 577 1769 2621 1085 41.40
1984-85 0.92 691 2693 3980 1630 40.95
1987-88 0.90 873 3687 5262 2132 40.52
1988-89 NA NA 4364 NA NA NA
Note: NA : Not Available.
Sources: 1. Dandekar V M and Wadia F K, "Development of Institutional Finance for Agriculture in India", Journal of Indian School of Political Economy, 1(2), July-December 1989, p. 206.
2. RBI Report on Currency and Finance, 1990-91.
101
About membership 2 in PACs Rath observed,
published by NABARD and the RBI show that in case of the
PACs the percentage of members in the smallest Size
class of agricultural land holdings availing short term
loans was not much smaller than the percentages in case
of members in higher size classes in most states, except
states like Bihar and Kerala. The real
appears in the membership of small farmers as against
the others. Taking country as a whole hardly 30 per
cent of the smallest size cultivators were members of
PACS, whereas this proportion was 75 to 100 per cent in
the case of the rest. Therefore, hardly 10 per cent of
the smallest farmers in the country received short term
loans from the cooperatives in any year."
As the loans overdue steeply increased with an
increase in the amount of loans outstanding during the
above period, the percentage of overdues to outstandings
also increased from 20.69 in 1950-51 to 40.52 in 1987-
88.
The details about the loans and advances
issued by PACS to different category of borrowers, for
selected years, are presented in Table 3.3.
102
Tab 1 e 3.3
DIstribution of Loans and Advances Issued by P(,[S ?.:c[;r:":ll-.Cj tc
Category of Borrowers - All Indl.1 and Tar-d) Uadu
(Rs In crare'S)
-----------------------------------------------------------------------Pe Clod All IndIa
Category of Borrowers
Farmers who own TAL ~ Total ---------------- others Upto 2 hectares
Above 2 hectares
Tlml} fJJdu
-------------------------------Category of Borrowers
------------------------Farmers who own TAL L
----------------- others
UPto 2 hectares
Above 2 hectarts
Tot.1
------------------------------------------------------------------------
1979-80 3480 6735 388 10603 222 267 30 519
to (32.8) (63.5) (3.7J (100) (42.8) (51.4) (5.8) ( 100)
1983-84
1984-85 6685 9789 907 17382 to (38.5) (56.0) (5.0) ( 100)
1988-89
1985-87 252 275 22 5~9
(45.9) (50.0) (4.0) ( 100)
Note: TAL = Tenants, Agricultural Labourers
Figures in parentheses are percentages.
For Tamil Nadu the data for the year. 1984-85, 19E7-88 2nd 1958-80; are not reported.
Source: Calculated from RBI Report on Currency and FInance lor rrlrv,nl years.
A cursory look Into Table 3.3 reveals the iact
th a t those farmers who own more than two hcc~2r0s of
land have got Issued a large portIon of loans fro~ P~[S
103
during the period under study. The share of this
category of farmers is around 50 per cent in Tamil Nadu
and is 56 to 63 per cent in the case of all-India
data. The small farmers category (less than 2 hectares)
received a share of 33 to 35 per cent at the all India
level and for Tamil Nadu it was little better at 43 to
46 per cent. The other category, tenant cultlvators,
agricultural labourers and other rural people were found
as neglected by the PACS. Thus, as the size of
landholding increased the percentage share of credit
received also increased indicatlng a positive
association between the two. This situation was even
worse during the year 1971-72 as observed by Slngh and
3 Asokan. That is, the farmers who owned above 2
hectares had received around 70 per cent of the loans
from PACS during that year.
B. Primary Land Development Banks
The performance of Primary Land Development
(earlier Mortgage) Banks (PLDBs) in providing term loans
to the farmers in India is rather very dismal as shown
in Table 3.4.
104
Table 3.4
Advances by Primary Land Mortgage/Development Banks in India
(Rs. in croras) --------------------------------------------------------
Year No. of Member- Loans Loans Loans Percen-Banks ship and Out- Over- tage of (lakh) ( 1 akh ) advan- stand- due Overdues
ces Ing to out-standing
--------------------------------------------------------
1948-49 272 1. 51 1 4 0.4 10.00
1950-51 286 2.15 1 6 O. 1 1.67
1960-61 463 6.69 7 25 1 .0 4.00
1970-71 865 35.37 104 448 18.0 4.02
1980-81 858 65.66 234 986 130.0 13.18
1983-84 885 69.86 280 1262 176.0 13.95
1986-87 899 87.95 390 1461 196.0 13.41
1988-89 NA NA 422 NA NA NA
Note: NA = Not available
Source: As in Table 3.2.
Even though the number of PLOSs and the
membership in them have increased manIfold durIng the
last four decades, their loans and advances have not
correspondingly increased. The percentage of overdues
to outstandings, though low, shows a continuous increase
during the same period.
105
Wi th respect to the dlstribution of loans and
advances of PLOBs to different category of farmers the
following picture emerges (for the five year period
1982-83 to 1986-87, in the case of Tamil Nadu and for 7
years (1982-83 to 1988-89) in the case of all-India].
Table 3.5
Classlfication of Loans Issued by PLOBs Accordlng to
size of Ownership Holdings - All Indla and Tamll Nadu
Per 1 ad
1982-83 to
1986-87
1987-89
Upto 2 hectares
1033 (47.3)
360 (46.2)
All Indla
Above 2 hectares
1151 (52.7l
419 (53.8)
Total Upto
2184 (100 )
779 (100 )
2 hectares
71 (56.3)
(Rs crores)
Tamll Nadu
Above 2 hectares
55 (43.7l
Total
126 (100 )
-------------------------------------------------------Source Calculated from RBI Report on Currency and
Finance for relevant years.
As for as the distributlon of the loans by the
PLOBs was concerned, it was found to be more or IQSS
equally distributed between the two categories of the
farmers during the period under study both at all Indla
level as well as at Tamil Nadu level.
106
Table 3.6 depicts the position of cooperative
credit societies in Tamil Nadu in 1989-90, and also of
Milk Producers' Co-operative Societies (MPCS) in 1988-89.
Table 3.6
IlJober, " .. .bership, Paid-up Share Capital, Loans Advanced, Outstanding and Overdue of Cooperative
SI Type af Soci,ties 110 •
I. Taei I N.du State Coopefltive Bank
2. T .. i I lI.du Stat. Land O.velop.,nt Bank
3. C.ntral Cooperative Banks
4. Prioary Agricultur.l Cr,dit Societi.s (including FSS)
5. Prioary Cooperativ, LOBs
6. Milk Produc.rs Co-oprrati v, societies ( 1900-891
Banks/Societies in Taoil Nadu - 1999-90
Nuab.r Meab.rship of Socie-ties
2,28,73B
181
19 15,51,256
4,596 71,21,340
181 69,32,31
7,925 25,53,000
Paid-up Capital Rs lakhs
558.27
2,190.14
7,631,07
8,269.80
2,082.30
536.57
Loans Advanced Rs '000
91,3Q9.71
2,41,557
4,07,100.55
57,647.32
2,41,503
Loans Outstanding Rs '000
91,309.71
2O,031.3B
1,32,072.82
76,690.91
19,293,64
Loans Overdue Rs '000
516.73
%,6117
29,624.42
39.5115.31
9,760,78
Sourc.: Statistic.1 Hand Book of Tanil Nadu, 1991, is.ued by Dir,ctor of St.tistics, Depart.ent af Statistics, H.dras.
107
As shown in Table 3.6 the oyerdue position of
both the PACSs and PLDBs in Tamil Nadu is alarming. Due
to poor
difficult
recovery these institutions were finding it
to expand or to diyersify their lending
operations. The number of MPCSs as on 1988-89 was found
as 7925. The ayerage number of members pe~ PACS, PLDB
and MPCS comes to 1549, 3830 and 322 respectively. The
amount of overdue per member is Rs. 8613 In the case of
PACS and Rs 1264 in the case of PLDSs. The overdue as
percentage to the loans outstanding is 51.6 and 47.9
respectively for PACS and PLDSs, during the year 1989-90.
C. Commercial Banks
witnessed
branches.
The period after the national,satlon of Sanks
a remarkable increase in the number of bank
From just 8,262 branches in June 1969 the
number has increased to 60,101 in March 1991, growth of
over seven fold. This enormous increase in the number
of branches has brought down the population served from
65,000 to 14,081 per bank office during 1969-1991. The
number of branches in Tamil Nadu has also Increased from
1371 in June 1971 to 4274 in March 1991 and the
population per branch is 13,069 as on March 1991.
The lending to priority sectors has grown from
Rs 504 crores in 1969 to Rs 35,242 crores in 1989 and
108
its share in the total bank credit has increased from 15
per cent to 42.2 per cent during the same period.
banks'
The share of rural branches in the commercial
total network of branches has steadily gone up
from a little over 22 per cent in June 1969 to 57.6 per
cent by the end of March 1990. Rural areas, which had a,
meagre share of 1.5 per cent in total bank credit in
1969 have over the years increased the1r share to about
15.8 per cent in the year 1989. And the upward
movement of credit-deposit ratio of rural branches from
a level of 37.2 per cent in June 1969 to 63.9 per cent
in March 1990, has also observed.
Financing under IRDP started in 1980 under
which commercial banks' lending 1S linked with central
government subsidy for the development of weaker
sections of the society like marginal farmers, rural
artisans and agr1cultural labourers. Table 3.7 glves
the details about the performance of IRDP during the
Si~th and Seventh Five Year Plan periods and also dur1ng
1990-91. The total term credit made available by the
financial institutions to this programme over the period
as shown in Table 3.7 indicates the increasing
participation of the credit institut10ns in programmes
implemented for the benefit of rural poor.
109
1
2.
3.
4 .
5.
6.
7.
8.
Table 3.7
Performance of IRDP in the Sixth and Seventh Five Year Plans and in 1990-91
Particulars
Total alloca-tion
Central allo-cat i on
Subsidy uti-lised
Total Term credit
Total f inan-cial help
No of bene-ficiaries (lakhs)
ST/SC bene-ficiaries(%)
Per account Rs.
i ) Loan
i i ) Subsidy
iii ) Total
Sixth Plan (1980-85 )
1766.81
901.08
1598.90
3101.68
4762.70
165.42
38.80
1820.00
977.00
2797.00
(Rs. in crores)
Seventh Plan 1990-91 (1985-90 )
3000.27 747.31
1513.84 374.56
3315.81 809.49
5372.53 1190.03
8688.34 1999.52
181.77 28.16
45.10 49.90
2956.00 4106.00
1824.00 2793.00
4780.00 6900.00 --------------------------------------------------------
Sources: Seventh Five Eighth Five Government of Delhi.
Year Plan (1985-90, Vol.II), Year Plan (1992-97, Vol India, Planning Commission,
110
and II ) ,
New
The financial help extended to th"
implementation of IRDP by the credit instltutions
(mostly Commercial Banks) has increased from Rs. 3101.68
crores during 1980-85 to Rs. 5372.52 Crores during 1985-
90. And during the year 1990-91 their contribution was
around Rs 2000 crores. The total financial assistance
per beneficiary also increased from Rs 2797 during Sixth
P I an to Rs 4780 during Seventh Plan and to Rs 6,900
during 1990-91 possibly to compensate for the
during the corresponding period.
inflatIon
Distribution of commercial bank credit (both
short-term and long-term) to various categories of
farmers may be seen from Table 3.8.
Short-term loans (including crop loans) are
given for purchase of production inputs, such as, seeds,
fertilizers, pesticides etc., and to meet the cost of
cultivation which includes labour charges for carrying
out agricultural operations, irrigation charges etc.
These loans are normally repayable within a period of 12
months and in certain cases 15 to 18 months, the
repayment schedule being related to the harvesting and
marketing of the particular crop.
Term (medium/long) loans are granted for
development purposes like development of irrigation
potential, purchase of tractors and other agricultural'
implements and machinery, improvement of land, purchase
111
of pumpsets/oil engines, plough animals etc. The period
of repayment of these loans generally extends from 3 to
10 years. It may be longer, particularly in cases when
refinance from NABARD is available.
For the convenience of analysis the ten year
period 1980-89 was taken into account and the same is
splitted into two five year periods viz., 1980-84 and
1985-89.
Table 3.8
Scheduled C"""ercill Banks' Direct Finance to Fareers - Percentage Distribution of Short Ind Long Ter. loans According to Size of land Holding - All India and Ta.il ~adu
Ttra IOills and period
Upto I hectare
A.I. T.N.
5iz. of land Holding
1-2 hectares Above 2 hectares
A.I. LN. A.I. T.N.
(Rs in lakhs)
Total
A.I. LN.
-----------------------------------------------------------------------ShorH.ra
1. 1980-81 Bb050 26430 60Bb1 13259 (35.31) (53.55) (25.0) (26.871
2. 19S5-89 251810 71511 221919 60155 m.95) (4).86) (30.811
lonQ-hrtl
1. 1980-84 31700 3057 3197b (16.09) (30.91) (16.23)
2. 1988-89 106926 16361 115349 118.28) !3l.62) (19.22)
Nate: A.I. ' All Indiaj T.N.' Taoil Nadu. FiQures In parentheses are in percentage.
(35.39)
2257 (22.83)
12635 (25.971
96593 (39.671
246817 (34.26)
\33359 (67.69)
362824 (62.0)
9672 (19.60)
38896 m.m
4576 (46.271
19671 (40.42)
243504 49361 1100.0) 1100.0)
720576 170Bb2 (100.0) 1100.0)
197035 9890 (100.0) (100.0)
585099 48667 (100.01 (100.01
Source: Calcul.ted frOi RBI Report on Currency and FinancI, for relevant ye.rs.
112
The distribution of short-term loans was found
relatively more in favour of marginal farmers (upto 1
hectare) followed by small farmers (1-2 hectares) in
Tami I Naduj Just opposite was the case at all-India
level (Table 3.8). And in the distribut,on of lung-term
loans a relatively more skewed pattern was observed at
all India level than in Tamil Nadu - 62 to 68 per cent
of the loans going to big farmers (above 2 hectares) at
all-India level; it was only 40 to 46 per cent in the
case of Tamil Nadu.
The percentage of overdues to demand in the
case of commercial banks was 47 in 1980-81 which has
decreased to 43 in 1985-86 and remained steady
thereafter upto 1988-89.
D. Regional Rural Banks (RRBs)
Within the time span of 15 years, the number
of RRBs has gone up to 196 in 21 states and two Union
Territories. As on September 1990 the number of
districts served by 14511 branches was 380. The
deposits mobilised by these branches increased from a
meagre Rs. 20 lakhs in 1975 to Rs 426752 lakhs in
September 1990 and the amount of outstanding advances
also increased enormously from Rs. 10 lakhs to Rs.
354750 lakhs during the same period. The overdues as
113
percentage of annual demand for repayment of loans by
RR8s was found to be 47.8 per cent and 32 per cent
respectively during 1982-83 and September 1990.
In Tamil Nadu a Regional Rural Bank was started
on 9th March 1977 in the name of 'Pandian Grama 8ank'
with its area of operation restricted to only two
districts: Ramanathapuram and Thirunelveli. As on
September 1990, the number of RR8s in the State was 3
and the number of districts covered by them was 7. The
number of branches of RRBs in the State has 1ncreased
from 50 in 197B to 208 in 1990. The deposits increased
nearly ten fold between 1980 to 1990 i.e. from Rs 491
lakhs 1n 1982 to Rs 4253 lakhs in 1990. Their advances
also steadily increased: Rs 1174 lakhs in 1980 to Rs3589
lakhs in 1987 and to Rs 5297 lakhs in 1990.
Refinance Performance of NABARD
The major activities refinanced by NABARD are
minor irrigation, dai~y development, farm mechanization,
land development, IRDP, gobar gas plants, fisheries,
poultry, plantation and horticulture. The refinance
performance of NABARD is given in Table 3.9.
114
Table 3.9
Disbursement of Refinance for Vaf'ious Purposes by NABARD ( 1982-83 to 1991-92)
(Rs crores) --------------------------------------------------------
Year Minor IRDP Dairy Farm Others Total irri- Deve- mecha-ga t i on lop- nisa-
ment tion --------------------------------------------------------
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
Total
244
312
335
385
460
473
387
498
496
502
4092 (30.1)
185 24
233 13
354 23
376 29
379 48
448 52
403 51
549 75
602 73
647 84
4176 472 (30.7) (3.5)
147
204
170
200
192
200
158
225
338
381
2215 <16.3)
103
130
179
202
255
309
271
355
393
440
2637 <19.4)
Note: Figures in parentheses are percentages.
703
892
1061
1192
1334
1482
1270
1702
1902
2054
13592 ( 100.0)
Others include land development, poultry, gobar gas, plantation and horticulture.
fisheries,
Source: National Bank News Review, 8(2) April 1992.
115
Sinc:e its inc:eption in 1982 NABAAD has
inc:reasi.ngly refinanced various activities related to
agriculture and rural development. The total refinance
from NABAAD has increased from As 703 crores in 1982-83
to As 2054 crores in 1991-92. A large portion of the
refinance has gone to major activities namely, minor
irrigation (30 XI, IADP (31 XI and farm mechanisation
(16 XI. Dairy development and other schemes were
allotted the remaining amount.
The foregoing analysis reveals that though the
financial institutions - PACS, PLDBs, commercial banks
and AABs - were involved in the provision of credit to
the farmers of all . 4
categories and agricultural
labourers and rural artisans, the performance of each
institution differred from another as far as providing
credit to the small borrowers is conc:erned. The thrC!e
major features which dominate the rural c:redit scene
are:
al mounting overdues of the credit institutions;
bl neglect of small borrowers; and
cl continuing dominance of non-institutional credit.
As the details regarding the first two
featUres were discussed already in the foregoing
paragraphs, the discussion on the remaining one 1S taken
up in the follOWing:
116
Dominance of Informal Segment (or) Non-Institutional Sources in the Rural Credit Scene.
Inspite of various measures taken both by the
Government and the Banking Institutions to extend the
credit to rural areas, the non-institutional sources
still matter a great deal in the area of rural credit
for various 5 reasons. Table 3.10 gives the share of
formal and informal segments in the total rural debt
pertaining to rural households between 1951 and 1981.
Tab I e 3. 10
The Share of Debt of Rural Households Held by Different Creditors: The Official Evidence
Creditor
Total debt (Rs crores at 1971-72 prices)
I. Institutional agencies (Banks, Co-operatives and Government)
II. Non-institutional agencies
Of this:
(a) Money lenders
(b) Relatives and friends
(c) Others
(Per cent)
1951 1961 1971 1981
N.A. 36,100 37,541 23,361
7.2 17.3 29.2 61.2
92.8 82.7 70.8 38.8
80.2 69.4· 54.2 24.3
11.5 5.8 13.8 9.0
1.1 7.5 2.8 5.5
Source: Katula, Rajni and Gulati, Ashok, "Institutional Credit to Agriculture:Issues Related to Interest and Default Subsidy", Journal 9.f. Indian School of Political Economy 4(4), October-December 1992, p. 701.
117
THE SHARE OF DEBT OF RURAL HOUSE-HOLDS HELD BY DIFFERENT CREDITORS
1951
1971
//\
I \ " \ , , ,-----\
\ , '
'" \
\ \
), . ::~::~. ! .... ~:~.!., f •
/
1961
1981
j 1 0
As shown in Table 3.10, though the dependence
on non-institutional sources for rural credit could not
be completely eliminated, the efforts of the' gov@rnment
and the banking institutions may be deemed to have
achieved a measure of success in this direction for the
share of non-institutional credit declined from 92.8 per
cent in 1951 to 38.8 per cent in 1981 and
correspondingly the share of institutional credit has
increased from a mere 7.2 per cent in 1951 to 61.2 per
cent in 1981.
INSTITUTIONAL CREDIT AND THE SHALL BORROWERS
In this section, a brief analysis about the
attempts made to reach the small borrowers (small and
marginal farmers, agricultural labourers, rural artisans
and other poor people in the rural areas) both by the
Government
Commercial
appreciate
and the Credit Institutions (RB I , NABARD,
Banks,
the
Cooperatives, and RRBs) is done to
in issues involved not only
institutional ising the credit (as discus~ed earlier) but
also in the process of taking such institutionalised
credit to the rural poor.
For the convenience of analysis and to
highlight the changes that have taken place from time to
119
time which have determined the policy modifications in
the field of rural institutional credit, the post-
independence period of 40 years (1947 to 1987)
divided into four distinct Phases.6
may be
A. First phase - period of Neglect (1947-1968)
B. Second phase - period of Consideration (1969-74)
c. Third phase - Period of Consolidation (1975-1978)
D. Fourth phase - Period of Real Attention (1979-1987).
A.First-Phase Period of Neglect (1947-68)
After the country became independent in 1947
various strategies were thought of by the Planners to
develop the economy. The most widely accepted was the
concept of Five Year Planning. QUite naturally during
the First Five Year Plan, the development of rural
India, where more than 80 per cent of her vast
population
attention.
lived was given high priority and greater
During the First-phase ( 1947-1968) by
tradltion and training, commercial banks in the country
including the then Imperial Bank of India (Now State
8ank of India) were prospering in the urban sector
mainly providing short-term finance to trade and
industry, concerned as they were With the two main
considerations of liquidity and profitability. They were
thus not equipped to satisfactorily respond to the
120
credit needs and requirements of the agricultural
sector in particular and the rural sector in general.
During this period the institutions providing
credit in the rural areas were Primary Agricultural
Cooperative Credit Societles and Land Mortgage Banks
(LMBs). As the name indicates, the LMBs give long-term
loans ranging from 5 years to 20 years against the
mortgage of land of borrower. The PACSs catered to the
short and medium-term credit needs of the farmers. The
rest of the rural population was left ln the hands of
non-institutional sources like money lenders, traders , and indigenous bankers. And the services of the above
two credit instltutions were cornered by the big farmers
as they belonged to the prosperous section of the Rural
Community controlling these institutions. These aspects
were well brought out by the two surveys conducted by
the Reserve Bank of India during this phase namely, AII-
India Rural Credit Survey (1951-52) and the All-India
Rural Debt and Investment Survey (1961-62).
During this phase the agricultural development
had been equated with rural development. Hence the
efforts of the government were directed towards
introducing the 'new technology' in agriculture during
the early sixties which succeeded in bringlng out a
'Green Revolution' during the late sixties. However,
121
this success was confined only to wheat growing areas
like Punjab, Haryana and Western UP and to a limited
extent to the rice growing areas. The success was in
the areas where assured i rri g at ion facilities were
available. Many research studies 7 pointed out that
only those big and medium farmers who had ac:cess to
inputs like credit adopted the new technology and the
small and marginal farmers lagged behind. Further, it
was observed that the gains of the increase in yield did
not adequately reach the agricultural labourers and
other rural poor.
B.Second Phase Period of Consideration (1969-74)
The recognition of the above said facts led
the All-India Rural Credit Review Committee (1969) to
suggest various measures to ensure better flow of credit
to the poor farmers. In pursuance of the
recommendations of thiS committee, the Government of
India
help
Agency
formulated two special, and specific schemes to
the rural poor namely, Small Farmers Development
(SFDA) and Marginal Farmers and "gricultu,.ai
Labourers Programme (MFAL). This reflected the concern
on the part of the development authorities to help the
rural poor during this phase. The economic philosophy
which led to the launching of the SFDA scheme in 1971
122
( and later MFAL) was simply that special preferentIal
arrangements were necessary for the supply of Inputs to
small farmers because the markets for inputs and
particularly credit which was the pre-condition for
access to all material inputs and equipment were
imperfect and non-neutral.
The bank natioalisation (1969) was a turning
point in the banking policy of the government, for it
intended to make the banking system reach the rural
areas.
a 1so
During the same year the Lead Bank Scheme was
introduced to make the banking system more
effective. The introduction of differential interest
rate scheme (OrR) in 1972 was another landmark in the
process of taking the institutional credit to the
poorest among the poor in rural areas~ National
Commission on AgricultUre (1976) emphasised a change of
approach
Commission
Societies
to credit.
towards the credit to small borrowers. The
recommended formation of Farmers'
(FSS) to improve the access of small
SerVic:e
farmers
The new technology introduced in agrIcultUre
was found to be neutral to scale but at the same time
capital intensive. This increased the demand for credit
by the farmers of all the size groups. The multI-agency
approach was suggested though lack of coordinatIon among
123
the credit institutions like cooperatives and commercial
banks had posed some field level problems.
The evaluation of credit schemes by the
research t . 8
s udles conducted during this phase showed
that th~ cooperatives had not extended the credit to the
small and marginal farmers to the expected level. But
it was refreshing to note that during this phase the
participation of commercial banks in financi n 9
agricultural operations had continuously increased.
However, the credit worthiness of the borrower was still
a norm that the commercial banks insisted to sanction
loans to the small borrowers. In the circumstances the.
number of small borrowers availing credit from
commercial banks did not increase conspicuously.
C.Third-Phase Period of Consolidation (1975-78)
The rapid expansion and dlverslficatlon of
operations of commercial banking upto 1975 by themselves
were not found to be adequate to serve the rural areas
effectively. A number of factors, both organisational
and operational, retarded the spread of the commercial
banking network into the economic llfe of rural areas.
Rural bias and rural orientation to banking was felt as
the need of the hour. At this juncture the Narasimham
Working Group (1975) suggested setting up of Regional
124
Rural Banks with the main objective of providing credit
and other facilities especially to the small and
marginal farmers, agricultural labourers, artisans and
sma 11 entrepreneurs in rural areas. The related
objective was to free the rural poor from the clutches
of exploitative money-lenders.
Hence, lt can be stated that only ln this
phase the consolidation of gains from the rapid
expansion of banking system in favour of rural poor was
started.
D.Fourth-Phase -Period of Real Attention (1979-87)
banks
After the substantial expansion of commercial
it was found that they mobilised sizeable amount
of savings from rural areas but channelised a certain
portion of
metropolitan
those
9 areas.
rural savings into urban
This development was obvious
and
from
the fact that finally the Reserve Bank of India had to
step in and stipulate that the public sector commercial
banks must ensure by the end of March 1979 that atleast
60 per cent of the deposits mobilised by them ln rural
(and semi-urban) areas would be deployed ln those areas
only.
125
The weaknesses found in the target oriented
programmes
introduce
like SFDA and MFAL made the Government to
the Integrated Rural Development Programme
(IRDP) in 1978-79 in 2,300 development blocks which was
extended to the entire country from October 1980. The
two special aspects of this programme are: Change of
approach ie, from individual orientation to household
programmes of income generation through asset and skill
endowment, and effective integration of the activlti"s
of the credit agencies and the development agencies
(like block office, District Rural Development Agency)
in the process of implementing such programmes.
In the meantime six more commerCIal banks were
nationalised in 1980. The CRAFICARD report In 1981
emphasised
borrowers
the need for identification of potential
among the rural poor to provide credit and
also subsidy to make them financially viable entItIes.
On the basis of the recommendatlons of thls report the
NA8ARD was established in July 1982. Speclfic aims and
objectives like 40 per cent of total advances was to go
to the priority sectors by March 1985; 25 per cent of
priority sector credit or 20 per cent of total
was to go to 'weaker sections' by March 1986, etc.
indicated to commercial banks.
126
credit
were
Summing up, the discussion on the structure
and growth of rura 1 institutional credit, this
chapter, was based essentially on secondary data at the
country level and at the state level. Wh 11 e 1t did
serve a useful purpose in understanding some of the
quantitatIve aspects/dlmens1ons of the problem on rural
cred it, we could not get useful inSIghts 1nto the
qualItative aspects, espec1ally relat1ng to the small
barrOl')!? rs. The present study based as It on m1cro-level
fIeld research, attempts to fill this gap.
127
Notes and References
1 The introduction of new High Yielding Var1ety (HYV) seeds, application of fertilizers and pesticides and adoption of scientific methods in irrigation and other farming practices were termed as 'New Agricul tural Technology'. That is, a set of compiementary inputs, which must be adopted and appl1ed together if the potential increase in output is to be secured. During late nineteen slxties these efforts boosted the per hectare yield of wheat and paddy and these improvements, in the course of time, came to be called as 'Green Revolution'.
2 Rath, Nilakantha, "Institutional Cred1t for
3
Agriculture in India", Journal of Indian School of Political Economy, 1(2) July-December 1989, p. 242.
Asokan, S Rand ill Rural Ind1a: Oxford and IBH,
Singh, Gurdev, Institutional F1nance Efficiency and Efficacy, New Delhi, 1988, p. 46.
4 The National Commission on Agriculture (1976) has estimated the credit requirement at Rs 16,000 crorQS by 1985 at full programme and at the graduated level 1t was Rs 9,400 crores. The actual advanced for the year 1984-85 was Rs 5,456 crores WhiCh formed 58 per cent of the credit requirement by the NCA. For details, Desai D K, "Institutional Credit Requirements for Agricultural Production - 2000 A D", Indian Journal of Agricultural Econom1cs, 53(3), July-September 1988, p. 538.
5 Reasons are simple procedures, timely availabil1ty, consumption loans and personal knowledge; for details, Asokan and Singh, ~ cit.
6 In the earlier paragraphs the process of institutionalisation of rural credit was studied 1n a chronological order. But in this section the whole process was divided into four phases to emphasise and to bring out in a nutshell the changes that were taken place in the field of rural credit in India.
128
7 Among others:
Bardhan, P K and Srinivasan, T N, ~ cit.; Singh Katar, ~ cit.; Johl, S S, ~ cit. and Raju, V T, QJh.cit.
8 After a detailed review of development of institutional finance for agriculture in India over four decades, Dandekar and Wadia conclude that the small farmer continues to be inadequately attended to. For details, Dandekar V M and Wadia F K, "Development of Institutional Finance for Agriculture in India", Journal of Indian School of Political Economy 1(2), July-December 1989, pp. 167-211.
9 In his study, taken at the district level, Viswanathan found that the credit deposit ratio in rural and semi-urban centres was less than one for Lead Bank. In the case of non-lead banks though lt was less than one in rural areas lt was greater than one in semi-urban centres. However, the credlt deposit ratio in the urban centres was found to be greater than one for both Lead and non-lead banks. This phenomenon explains how funds mobilised in other areas were deployed in the urban centres of the distrlct. For full details: Viswanathan S.P., A Study of the Lead Bank Scheme with Speclal Reference to Coimbatore Distrlct, Unpubllshed doctoral dissertation, Bharathiar Unlversity, COlmbatore, 1988.
129
CHAPTER IV
METHODOLOGY
It may be recalled that as spelt out in the
introductory chapter, the major focus of the present
study
credit
Tami 1
is on analysing various aspects of institutional
vis-a-vis small borrowers in the rural areas of
Nadu. The methodology followed in undertaking
this study is detailed out in this chapter.
A. Selection of the Study District
It may be mentioned at the outset that due to
constraints of time and resources, and for operational
convenience, the selection of villages for this study
was restricted to Coimbatore district. Coimbatore
distrIct was selected purposively on the basis of the
following considerations:-
(i) Among all the districts in Tamil Nadu percentage
of agricultural labourers to the total rural
population in a given district was the hIghest in
Coimbatore (27.13 per cent in 1980-81).
130
( i i )
( ii i )
( i v )
Banking facilities (measured in terms of avt!rage
population per bank office) were fairly well-
developed compared to other districts (the
average population per bank office was 11830 as
on 31.12.1982 and was the lowest compared to all
other districts).
Under IRDP, subsidy per family and loan per
family were higher than the corresponding state
average figures.
Schemewise particulars about the allocation and
achievement under IRDP for the year 1981 revealed
that minor irrigation and dairying were the two
important ones that benefitted most both ln the
state and in the district.
(v) Agro-climatic conditions in the district in the
year 1983-84, the reference year for our field
investigation to be conducted were normal, unlike
in many other districts (e. g • , Thanjavur,
Tiruchi, Tirunelveli and Ramanathapuram) which
were severely affected by floods during the
months of February and March 1984.
Apart from the above considerations, the fact
that the researcher hailed from Coimbatore district lent
an added advantage in appreCiating the naunces of socio- •
131
political-economic system prevailing in the district
that would influence the working of various i~st1tutions
including banks, co-operatives, etc.
Background of the Study District
Coimbatore district, endowed with vast
and natural resources as well as technical physical
skills and enterprise, is better known for its te><tile
mills, power looms, hand-looms, hosieries, electrical
motors and pumpsets, small and cottage 1ndustries. The
district has 7 taluks and 21 administrative blocks. In
terms of economic activities the distr1ct 1S very much
balanced with both agriculture and 1ndustry being the
major sectors of the economy. There is a fairly a well-
developed and well-spread network of financial
institutions within the district. In 1981 the d1strict
had 12 branches of the Central Cooperative Bank, 289
Village Cooperative Agricultural Credit Societies, 13
Primary Land Development Banks and 247 branches of
commercial banks.
The focus of the study be1ng on !lsmall
borrowers" it is pertinent to mention that among various
schemes of the government, relatively speaking, IRDP
benefitted most the small borrowers. And the single
highest contribution to this programme in the district
132
came from the commercial banks (with 93 per cent of the
total credit under IRDP financed by the ~ommercial
banks) • The role of cooperatives and the PLDSs in
financing the IRD Programme in the district was not
significant. Therefore, considering the above aspects,
the present study confines itself to the analysis of the
participation of commercial banks in financing small
borrowers and the impact the bank credit under the
had on the beneficiaries' economic conditions.
B. Selection of Taluks and Blocks for the Study
IRDP
Following the selection of Coimbatore district
for the study, we proposed to select two taluks: one
less relatively
developed,
differential
developed and another relatIvely
for the purpose of understanding the
levels of utilization of credit by the
small borrowers in relation to the level of development
of the taluks. Here the developed taluk meant, the
taluk having comparatively well developed banklng
facilities,
veterinary
facilities.
markets,
hospitals
irrigation, milk
and other
cooperatives,
Infrastructural
At the time of selection of the study region,
Coimbatore dist'rict consisted of 6 taluks only
(Avinashi, COimbatore, Mettupalayam, Palladam, Pollachl
133
and Udumalpet). Subsequently in 1984 one more taluk
(Valparai) was carved out of the then existing 6 taluks.
Since Coimbatore taluk was more urban in nature (the
percentage of rural population to total population was
22 as per 1981 census), it was not considered for
selection.
The selection of taluks was
constructing a composite index based on four
in the following manner.
Indicators:
1) Concentration of rural population
2) Level of infrastructural facilities
3) Concentration of small holdings, and
4) IRDP performance.
made by
indicators
The first indicator was measured in terms of
three ratios:
a) Percentage of rural population to the total
population (1981 Census).
b) Percentage of agricultural labourers population to
total population <1981 census) and
c) The percentage of cultivators population to total
population (1981 census).
134
The second indicator was measured in terms of
a) Per bank population,
b) The percentage share of irrigated area in the net
sown area,
c) Number of cultivators per regulated market,
d) Veterinary hospital facilities (Number of
livestock per VH),
e) Number of milk producers cooperative societies,
and
f) Number of village cooperative agricultural credit
societies.
The third indicator was measured 1n terms of
a) Proportion of marginal holdings (below 2.5 acres)
to the total holdings (Nos), and
b) the proportion of small holdings
acres) to the total holdings (Nos).
And the fourth indicator,
(2.5 to 5.00
the IRDP
performance, was measured in terms of :
a ) The percentage of agricul tural labourers
benef1tted upto December 1982 under the IRDP to
the total agricultural labourers' population.
135
b) Loan amount per beneficiary(IRDP 1982-83).
c) Subsidy amount per beneficiary (lRDP 1982-83).
d) The percentage of total number of beneficiaries
benefitted upto May 1983 under lRDP to the total
number of beneficiaries identified by the
District Rural Development Agency <DRDA) as
eligible for IRDP scheme.
After giving ranks to each taluk according to
its place in each indicator, the ranks were combined in
order to arrive at the composite index, <Table 4.1).
Accordingly, it was found that Udumalpet taluk got first
and Palladam taluk the last rank.
Table 4.1
Ranking of the Five Taluks of Coimbatore Distrlct on the Basis of Selected Indlcators
Taluk
AVlnashi
Mettu-palayam
Pall adam
Pollachi
Udumalpet
Combined Rank of Selected Indicators
First indicator
2
5
3
4
1
Second indlcator
2.5
4
5
2.5
1
Th i rd indicator
2
1
3.5
5
3.5
Fourth indicator
3
4
5
2
1
Composite Rank
2
4
5
3
1 --------------------------------------------------------
136
These two taluks were, therefore, selected for
the purpose of the study to represent a relatively
developed and a relatively less developed region
respectively.
Udumalpet taluk consists of three blocks
namely, Gudimangalam, Madathukulam and Udumalpet. And
the Palladam taluk consists of five blocks namely,
Palladam~ Pongalur, Sultanpet, Sulur and Tiruppur. The
next stage was to select one block from each of these
two taluks. While selecting the blocks, Udumalpet block
in Udumalpet taluk and Tirupur block in Palladam taluk
were not considered because of their being urban in
nature. Another reason was that out of the 28 bank
branches in Tiruppur block, 25 were situated in Tirupur
town alone, and in the same way, in Udumalpet block out
of the 15 bank branches 8 were situated in Udumalpet
town itself.
Leaving aSlde these above cited blocks
(Tiruppur and Udumalpetl, for the selection of one block
each in the taluks of Udumalpet and Pall ad am
respectively, the following procedure waS fullowed: A
composite index was constructed on the basis of three
indicators: The first ,ndicator was the level of
infrastructural facilities which was measured in terms
of (al per bank population, (bl percentage of irrigated
137
•
area to net area sown, (c) Veterinary service facilities
(area/villages per veterinary hospital), (d) Milk
producers cooperative societies, and (e) Village
cooperative agricultural credit societies.
The second indicator consisted of two
variables to denote the concentration of poor people:
one was the percentage of small holdings (less than 2
hectares) to the total number of holdings, and the other
was the percentage of identified poor people by DRDA
(upto 31 .5. 1983 ) to the total population of the
respective blocks.
And the third indicator was the IRDP
performance which was measured in terms of:
( a ) The amount of credit (loan + subSldy) per
beneficiary under the IRDP during 1982-83 and
(b) The percentage of beneficiaries benefitted (upto
31 .3.1983 ) under IRDP out of the total number of
identified beneficiaries (upto 31.5.1983).
The ranking of the blocks in each taluk
separately, based on the composite inde~ with reference
to selected indlcators is given in Tab 1 e 4.2.
Accordingly, Madathukulam block in Udumalpet taluk (as
developed) and Pongalur block ln Palladam taluk (as
less developed) were selected for the study (See Map-I).
138
INDIA
N
10 TAMIL NAD~:"r:.':i-/1._
• ;';"-','.r ~) £ '::, ,-~.
lf~:. ~~.'~ ~t~·: '--.-. ." ~ ..J . ~.., ~ -- -, ...... . v_,. c. -', I
C· ,:::J:~'-' , ... ' I _.:._.
, .~,,- ." ..
SMIPLE BLOCKS
1 MADATIiUKULAM
2 PONGALUR
(NOT TO SCALEl
COIMBATORE
STATE BOUNOJ\RY DISTRICT BOUND~RY TALUK BOUNDARY RIVER & STRI:::AMS BL.O.(.K aOIJNl'A'RY
139
..... c ~ .~ .. --- ..... ---
Table 4.2
Ranking of the Blocks on the Basis of Se12cted Indicators
---------------------------------------------~----------Blocks Combined Rank of Sel~cted
Indicators Composite
Rank --------------------------------First Second Third indicator indicator Indicator
--------------------------------------------------------1 Udumalpet Taluk:
a) Gudimanga-I am
b ) Madathu-kulam
£ Palladam Taluk:
a) Palladam
b) Pongalur
c) Sultanpet
d) Sulur
2 2 1.5
1 1 1 .5
3 4 2
4 1.5 4
1 1.5 3
2 3 1 --------------------------------------------
Supporting information
2
1
3
4
1
2 ------------
our
selection of blocks comes from the COlmbatore
Credit Plan Report 1983. According to this report,
though both Madathukulam and Pongalur blocks were
predominantly rural in character, Madathukula~ block was
comparatively well pi ac ed in terms of varIOUS
infrastructural facilities and extension services,
whereas Pongalur block was a dry block devoid ot
infrastructural facilities.
140
The performance of IRDP in the selected blocks
in terms of number of beneficiaries, credit and subsidy
sanctioned and credit-subsidy ratio is given
Table 4.3.
Table 4.3
IRDP Performance in the Selected Blocks (1982-83 )
Madathukulam Pongalur
1 . Total number of beneficiaries 1,129 500
2 Total credit sanctioned (Rs) 25,31,317 8,63,898
3 Credit per bene-ficiary (Rs) 2,242 1,727
4 Total subsidy utilised iRs) 7,67,866 2,72,757
5 SubSidy per beneficiary (Rs) 680 545
6 Credit to subsidy 3.29 3.16 ratio
in
The available information on the IRDP
performance in 1982-83 in terms of number of
beneficiaries, credit and subsidy per beneficiary and
the credit subsidy ratio clearly indicates that the
Madathukulam block fared well compared to that of
Pongalur block.
141
C Selection of Schemes
Though the small borrowers have been financed
by the credit institutions to undertake various schemes
the present study proposed to limit the analysis to two
major schemes only. Accordingly, sample beneficiaries
were drawn from the minor irrigation schemes
(representing farm investment loans) and dairy scheme
(representing subsidiary occupation loans). It was
found that among the farm investment loans, Minor
Irrigation scheme received priority - both in terms of
allocation (44% to total) and achievement (77%), the
percentage of performance beIng 171 during the year
1981 in Coimbatore district. Similarly, among the
subsidiary occupation loans (Animal husbandry and other
allied activities), the proviSIon of milch animals
dominated,
allocation
by receiving 45 per cent of
and involving 55 per cent of
the total
the total
e><penditure, the percentage of performance being 132.
For the above said reasons, the minor irrIgatIon scheme
and the dairy scheme were purposively selected for an
in-depth analysis.
D Selection of Banks/Credit Instjtution
Having selected the blocks and decided the
schemes to be studied, the next step was to select the
bank branches for the present study.
142
The available information with respect to bank
branchwise performance in financing small borrowers was
collected from DRDA office at Coimbatore and from the
respective block offices. The details are given
Tables 4.4 and 4.5.
Financing Small Branches in
Table 4.4
Borrowers under IRDP by Various Madathukulam Block during 1980-83
in
Bank
Name of the Branch Small Marginal Agrl. Total
1 Branches located within the block
a. lOB, Kaniyur
b. Canara Bank, Madathukulam
c. lOB, Komara-ling am
d. Canara Bank, Thungavi
e • LDB, Kaniyur
f. VCACS, Madathu-kulam
2. Branches located outside but also serving the block
a. CBI, Udumalpet
b. SBI, Udumalpet
c. lOB, Udumalpet
d. Canara Bank, Udumalpet
e . LDB, Udumalpet
farmers farmers labourers
87 121 445 653
17 29 212 258
7 13 62 82
8 16 75 99
1 1
5 :;
25 1 200 226
124 124
9 7 16
1 2 3
2 2 --------------------------------------------------------
143
As shown in Table 4.4 judging from the
branchwise performance, the lOB branch at Kaniyur and
Canara Bank branch at Madathukulam were selected and a
detailed list of beneficiaries of the dairy scheme for
the year 1982 was obtained to represent the Madathukulam
block (hereinafter Block I).
Table 4.5
Financing Small Branches
Borrowers under IRDP by Various in Pongalur Block during 1980-83
Name of the Branch
1 Branches located within the block
a. SB1, Pongalur
2. Branches located outside but also serving the block
a. SBl, Tiruppur
b. Canara Bank, Tiruppur
c. lOB, Tiruppur
d • Canara Bank, Palladam
e • Others
Small Marginal Agricul-farmers farmers tural
labourers
109 181 253
Bank
Total
543
41
32
128
2
23
--------------------------------------------------------
144
As shown in Table 4.5, the State Bank of India
branch at Pongalur (hereinafter Block II) provides a
large chunk of the credit and the participation of other
banks which are operating from outside the block was
very less. In view of the above, SBI branch at Pongalur
was selected as the sample branch. (Actually another
commercial bank called South Indian Bank Ltd., was also
working at Koduvai in the same block but its
contribution to the IRDP was found nil).
E Selection of Beneficiaries
a. Sample Beneficiaries from Minor Irrigation Scheme
As stated earlier, the complete list of
beneficiaries under various minor irrigation schemes was
obtained from the DRDA office at Coimbatore and the bank
branches selected from the two blocks. Using that
information, beneficiaries were classified under variOUS
schemes over the period 1978-82 as given in Table 4.6.
Considering the importance and number of beneficiaries
under each scheme, the beneficiaries were seiected from
the following schemes: New Well, Deepening of well and
oil engine. The other schemes, like pipe line, provision
of Electric Motor Pumpset, well repair and other such
schemes were not considered for the present study. And
145
Table 4.6
Number of Beneficiaries Financed Under Minor Irrlgation
Schemes in the Selected Blocks during 1978-82
-------------------------------------------------------Schemes 810ck I 810ck II
-------------------------------------------------------
1. New well 7
2. Deepening of well 23 22
3. Oil engine 10 12
4. Pipe 1 ine 8 6
5. Electric motor pumpset 3 4
6. Others 5
-------------------------------------------------------
also it was decided to have beneficiaries from the year
1978 onwards to 1982. This was mainly for two reasons:
(1) to have a sufficient number of benef1ciarles, i .. e .. ,
from 1978-82; the total number of small and marginal
farmers benefitted under the above sald three schemes
was 40 in Block I and 34 in Block II and (ii) the number
of beneficiaries benefitted before 1978 was very small.
Moreover, to estimate the impact of the schemes a
reasonable gap (say two years) between the investment
made and the evaluation period is required. Henc e, a II
the beneficiaries who have borrowed during the years
1978-82 were selected. Accordingly, all the 40
146
beneficiaries from Block I and all the 34 beneficiaries
from Block II were selected. Schemewise breakup of the
selected beneficiaries is given in Table 4.7
Table 4.7
Number of Beneficiaries Selected Under Minor
Schemes
1 New well
2 Deepening of well
3 Oi I engine
Total
Irrigation Schemes
No. of sample beneficiaries selected from
Blocl< I Block II
7
23 22
10 12
40 34
b. Sample beneficiaries from Dairy Scheme
Total
7
45
22
74
The data obtained from the selected bank
branches regarding the categorywlse number of
beneficiaries under dairy scheme for the year 1982 were
given in Table 4.8.
147
Table 4.8
Bank Branchwise Number of Beneficlaries under Dairy Scheme in 1982 in the Selected Blocks
-------------------------------------------------------Block and Bank Category of Borrowers
Small Marginal Farmers Farmers
Agricultural Labourers
------------------------------------------------------Block I
1 Canara Bank 4 10 50
2 Indian Overseas Bank 39 44 68
TOTAL 43 54 118
Block II
1 State Bank of India 32 50 76
-------------------------------------------------------
Keeping in view the time and financial
resources available and also to have a fairly
representative sample, 50 per cent of the beneficiaries
were selected randomly from the lists which were
obtained from the respective bank branche9.
Accordingly, the following is the sample size of the
three categories in the two blocks under study.
148
Table 4.9
Number of Beneficiaries Selected from Dairy Scheme
Block
1 Block I
2 Block II
categorywise and blockwise
Beneficiaries Selected
Small Marginal Farmers Farmers
22 27
16 25
3B 52
Agricultural Labourers
59
3B
97
Total
lOB
79
187
Apart from this, the data were also collected
from 30 randomly selected non-beneficiaries each in the
two blocks (10 small farmers, 10 marginal farmers and 10
agricultural labourers) from the lists available in the
block offices. Adding this, the sample size of the
present study comes to 321, as given below.
1. Minor Irrigation beneficiaries
2 Dairy scheme
Block I
40
beneficiaries lOB
3 Non-beneficiaries 30
TOTAL 178
Block II
34
79
30
143
149
TOTAL
74
IB7
60
321
F. Method of Data Collection
The required data were collected from the
sample beneficiaries by canvassing a pre-tested and
structured interview schedule.
While collecting data from the benefIciaries
in the selected blocks, lnformal d,Scusslons were also
held WIth the various functIonaries at the block and
village levels (See Table 4.10) who were found involved
Table 4.10
FunctIonaries Consulted DurIng the Field Survey
Functionaries Block I Block II
1 • Block Development OffIcer 1
2. Officers at the block offIce 2 2
3. Bank branch managers 2
4. AgrIcultural Fleld OffIcers 1 1
5. Land Development Bank OffIcers 2 2
6. Veterinary Doctors 1 1
7. Vlliage Level workers 3 2
8. MPCS PreSidents 2
9. MPCS secretaries 6 5
10. ASCS secretaries 2 2 ---------------------
Total 22 15 ------------------------------------------------------
150
in the implementation of special schemes for the welfare
of the
check
rural poor. This exercise was done
the information obtained from the
to cross
selected
benefic:iaries; to have a fair knowledge and
understanding about the working of the selected schemes
at the village/block levels; and also to obtain the
views of the concerned functionaries at the block as
well as village levels.
The data pertaining to the amount of loan and
subsidy sanctioned to the selected beneficiaries was
collected from the records of both block office as well
as the selected bank branches. The information about
the actual amount spent to purchase the milch animals
was gathered,
Secretaries of
Workers (VLWs).
apart from the beneficiaries, from
Milk Societies and the Village
the
Level
The Information about the repayment of dairy
loan by the selected beneficiaries was obtained from the
bank records, from the Secretaries of MPCSs and from the
beneficiaries themselves.
G.Method of Data Analysis
The primary data collected was tabulated and
analysed by using the statistical tools and methods like
averages, percentages, regression analysis and fInancial
151
viability analysis. The collected data have been
classified schemewise
comparative analysis.
and categorywise to facliltate
To find out the impact of dairy loans on the
income, employment and asset position of the selected
beneficiaries two methods have been adopted. The first
one is the inter-temporal (before-after) method wherein
the post-loan income, employment and asset position of
the selected beneficiaries have been compared with that
of their pre-loan levels. The differences found betw.en
the two points of time are attributed to the impact of
the loan. The second method is the cross-sectional
analysis in which the income levels of the selected
beneficiaries are compared with that of selected non-
beneficiaries and the difference in income level of
beneficiaries, if any, has been attributed to the impact
of the financed scheme.
Further, to capture the impact of dairy loans
in a more realistic manner, the income and employment of
the selected small and marginal farmers, who took dairy
loans have been classified into three categories net
farm income and employment, net non-farm income and
employment and net income and employment from dairying.
The pre-loan levels of these three categories of income A
and employment are compared with that of post-loan
152
levels to reveal the impact of dairying. Simi larly, the
income and employment levels of selected agricultural
labourers have been classified lnto three types: wage
employment and income, employment and income from other
than wage labour (goats/sheep/piggery/poultry) and
employment and income from dairying. The pre-loan
position wi th regard to the above mentioned three
categories of income and employment has been compared
with that of post-loan position to find out the impact
of dairy loans.
Net farm income is arrived at by deductlng thR
cost lnvolved in cultivation (i.e. all the pald-out
costs) from the gross farm income. Net lncome from
dairying arrived at by deducting the expenditure
involved in maintaining the animal from the income
earned by the sale of milk. The money value of farm
products and milk consumed by the beneflciary
households, lncome earned by the sale of calves and cow-
dung are also included in the income.
The working days of women and children
converted into mandays of eight working hours .
The rate of •
change in income and
were
the
incremental income-investment ratios are also worked
out.
153
A linear production function technique hns
been employed to estimate the relative shares of factors
of production in the earnings from dairylng. The
following variables, per dairy unit basis,
used for the production function analysis. The
prevailed market value/cost is imputed for the family
labour and for the fodder cultivated on the farm
respectively.
Milk Production Function
Where:
bl Y = a.x!
Y = Value of milk production (in Rs)
xl = Value of fodder (in Rs)
><2 = Value of concentrates (in Rs)
x3 = Labour charges (in Rs)
x4 = Veterinary expenses (in Rs)
x5 = Other expenses (in Rs)
u = Error term
To work out the impact of minor irrigatlon
schemes on the farm economy of the selected small and
marginal farmers, the inter-temporal approach (before
and after the loan) has been adopted. The changes which
were observed in the case of selected variables due to
the minor irrigation works undertaken by the selected
154
beneficiaries have been attributed to the Impact of such
loans. The details of variables selected, the methods
of computation of cost and value of output are discussed
in the respective sections of the relevant chapter.
To evaluate the financial viability of the
dairy loans, four criteria were used: ( i ) pay-back
period,
ratio,
( ii ) Net present value, ( iii )
return;
Benefit-cost
and (iv) Internal rate of for
irrigation schemes only Benefit-Cost Ratio and
Rate of return were used.
iL Pay-Back Period
minor
Internal
The pay-back period is the tIme It takes the
beneficiaries to recOVer the initial investment which
they made on the cattle or farm, out of the earnings
from the purchased animals or farm. In the case of
investment at a single time period, and constant income
streams over a period of years, the pay-back period has
been obtained by dividing the total investment with the
income for one occasion. When the returns are discrete
and non-uniform, as In the case of milch cattle, the
pay-back period can be taken as the time required to
recover the cost of purchase and maintenance of milch
cattle from its returns. This can be e~pressed as:
155
Where At = returns in period t
Ct = Cost in period t; t=l, 2
Co = the initial investment
t* = time pe r iod in which the returns e)(ceed costs.
iil Net Present Value
Costs and returns at different periods of time
are not strictly comparable in the sense that one rupee
received or spent at one point of time is not e)(actly
the same as the same amount at another time. This
differential time value of money arises on account of
the investment opportunities available, and the changes
in the purchasing power of money. To make the revenue
and cost figures comparable for permitting additions
over a period, the present value of future returns and
costs are calculated using discounting principles. The
net present value of an investment is defined as the
discounted sum of streams of income during the
productive life period of the milch cattle or for
investment. In algebraic terms it could be represented
as: l\..
NPV 2. Rt - c,t t~, (1;- \'y
156
Where Rt and Ct have the same meaning as in
the case of pay-back period, and r corresponds to the
discount rate. The number of years is taken to be n.
An initial investment will be justifiable if the amount
required to be invested is less than the NPV. In cases
where the initial investments themselves are considered
along with the cost, the investment will be sound as
long as the NPV is positive.
iii ) Internal Rate of Return
It is a measure of the interest-paying
capaci ty of the project. It is defined as the rate of
return which makes the NPV equal to zero when the
initial investment is considered along wi th cost. In
other words, the internal rate of return is that
discount rate which equals initial investment on milch
cattle or on farm with the discounted net returns from
the investment during the productive l'fe period of the
animal or asset. Using the symbols, the internal rate
would be the value of r obtained while solving the
equation:
Where Rt and Ct when t =1, 2, ...• corresponds
to the same definitions used earlier, co-corresponds to
the initial investment and Ro is zero.
157
After calculating the value of r it will be
compared with the cost of capital. The investment in
milch cattle or farm will be considered desirable if the
internal rate of return is higher than the cost of
capital.
iv) Benefit-Cost Ratio
The benefit-cost ratio gives the returns per
rupee invested during the entire productive life period
of the farm investment or milch cattle, which in symbols
can be expressed as:
The investment in the milch cattle or on farm
can be justified if the benefit-cost ratio is more than
one.
158
CONCEPTS
A brief e~planation about some of the
important concepts and terms used in the present study
is given below,
i) Small Borrowers
Those small and marginal farmers and
agricultural labourers who have received loans for
financial productive purposes from the organised
institutions.
The Ministry of Rural Reconstruction,
Government of India, laid down the following criteria
to define
population.
and identify the poor among the rural
a) Small FarmersL A cultivator with a landholding of 5
acres or below is a small farmer. A farmer who has
Class I irrigated land, as defined in the State Land
Ceiling Act, of 2.5 acres or less, wi I 1 also be
considered as a small farmer. Where the I and is
irrigated but not of Class I, a suitable conversion may
be adopted by the State Government with a ceiling of
five acres.
159
b) Marginal Farmers: A person with a land holding of
2.5 acres or below is a marginal farmer. In the case of
Class I irrigated land, the ceiling is 1.5 acres.
c) Agricultural Labour: A person without any land, but
having a homestead and deriving more than 50 per cent of
his income from agricultural wages is an agricultural
labourer.
iiI Institutional Credit
The credit provided by the organised agencies
like Commercial Banks, Cooperative Credit Societies,
Regional Rural Banks, and Land Development Banks.
However, the present study covers only commercial banks
and LOBs.
iii I Rural Areas:
The 1981 census definition of rural areas was
followed in selecting the study area.
ivl Accessibility
Accessibility includes, the access to the
information about the bank loans, special schemes, and
subsidies, the ability of the small borrowers to contact
the bank or the agency and their capacity to avail the
services provided by the cooperative credit societies
and milk producers cooperative societies.
160
The term access can further be divided
two, namely, 'formal access and 'effective ace ess' .
The presence
cooperative
of or the functioning of bank
societies, veterinary hospitals,
branches,
marketing
centres in the selected villages indicate the formal
access to the small borrowers to such agencies.
effective access will be measured in terms of the
The
small
borrowers' participation in the above said institutions
and organisations, which in turn increase their economic
well being.
v) Utilisation of Loan
A loan is taken to be utilised when the
purpose for which it was sanctioned had been achieved
and the benefits from it had started flowing to
borrowers anytime during the period of survey.
vi) Impact of Loans
The increase or decrease in employment,
income or assets or a combination of all these of
borrower who has invested the borrowed amount
productive purpose, is termed as an impact of loans.
or
the
or
a
a
The changes caused by the loan uti lis a t ion
(investment) in the income and employment levels, asset
161
position or in the farm business of a borrower is termed
as impact of loan.
vii) Minor Irrigation Schemes
In the present study the analysis is confined
to those minor irrigation schemes which directly helped
the small and marginal farmers to increase the area
under irrigation or to increase their cropping
intensity. Accordingly, only the following schemes were
included in the present study: New Well, deepening of
well and oi I engine. The schemes like pipe line,
parapet wall construction, and well repair, were eKcluded.
viii)Financial Viability of Loan
The viability of the loan is determined on the
basis of private costs and returns accruing to the
borrowers, and their ability to repay the loans as
stipulated by the provisions of the loan agreement.
162
CHAPTER V
RETURNS TO INVESTMENT IN DAIRY SCHEME
Based on detailed data collected from sample
borrowers who availed bank loan for dairying in selected
blocks, this chapter deals with the returns to
investment in dairying. The discussion is presented in
two sections. The procedures adopted by the block
officials to identify the beneficiaries to sanct10n the
loans and the selected beneficiaries' access to banks,
milk societies, veterinary services and cattle insurance
are briefly discussed in the first section. The impact
of the scheme on employment level, income and asset
position of the sample beneficiaries is analysed, by
comparing the status of beneficiaries on such aspects at
two points of time before and after the loan 1n the
the second section. The comparison between
beneficiaries and the non-beneficiaries,
necessary, is also done in this section.
wherever
Product i on
function technique is used in particular to workout the
contribution of selected independent variables to the
dependent variable namely, income from dairy scheme.
163
SECTION I
Identification of Beneficiaries
The manual on IRDP published by the Government
of India and the guidelines issued by the NABARD to the
commercial
procedures
to the
banks gave clear-cut definitions and
to identify the small borrowers. According
procedures laid down, the Distrlct Rural
Development Agency (DRDA) with the help of block level
machinery was to identify the eligible beneficiaries
through a household survey. For this survey the bank
officials were also expected to extend their co-
operation to the block officials. After the household
survey the banks were to prepare a technically feasible
and financially viable project/scheme for the concerned
household according to the needs and potentials of the
household by keeping in view the resources available in
the region.
The above mentioned procedures were found to
have been hardly followed in practice in the study area.
For example, in both the blocks no household survey was
undertaken prior to sanctioning dairy loans to small and
marginal farmers. By and large similar was the case
while selecting the beneficiaries from the class of
agricultural labourers, although some semblance at a
164
household survey was evident in Block-I only. Out of 59
agricul tural labourers selected in Block I, 17 were
identified through a limited household survey. The rest
were selected arbitrarily by village level worker6
(VLWs) in consultation with the Presidents and
Secretaries of the Milk Producers Co-operative Societies
(MPCSs) and political leaders.
Literacy Level of the Selected Beneficiaries
Table 5.1 gives details about the literacy
level of the selected beneficiaries.
Table 5.1
Literacy Level of the Selected Beneficiaries ----------------------------.. -----------
Block I Block II ----------------
Literacy level Harginal SlId I Agricul tural Marginal 5 •• 11 Agricul tural faroers farlers. libourers far.ers faraers labourers
------SCs Others SCs Others --------------------
I. 11 literates 7 4 41 7 9 3 21 B (25.9) (1B.21 (83.7) (70.0) (36.0) (1B.7) 177.8) 172.7)
2. Priury 19 14 8 3 16 10 6 3 (70.4) (63.6) (16.3) (30.0) (64.0) (62.5) 122.2) 127.11
3. Secondary I 3 2 ( 3.71 (13.6) n2.5)
4. Collegiate 1 1 ( 4.5) ( 6.3)
---------------------27 22 49 10 25 16 27 \I
(100.0) (100.01 (100.01 (100.0) (100.01 (100.01 (100.0) (100.01 --------------------------Figures in Parentheses are percentages to the total nulber of beneficiaries selected under each category.
165
The percentage of literates among the selected
agricultural labourers in both the blocks was found very
low, whereas the corresponding percentages for the
selected small and marginal farmers in both the blocks
were found to be highly impressive. The literacy rate
of the selected scheduled castel labourers' 1S very low
it is 16.3 per cent in block I, and 22.2 per cent in
block I I . The overall literacy rate of the selected
beneficiaries is 43.5 per cent and 48.1 per cent,
respectively in Block I and in Block II.
Selected Beneficiaries' Access to MPCS
The selected beneficiaries seemed to have fair
access to MPCS. To start with, thanks to the insistence
from the functionaries, they all became the members of
MPCSs, for the milch animal loans were sanctioned mostly
to the members of the MPCSs or to those who assured that
they would supply the milk to the MPCSs as it would make
the recovery of loans by the banks easy. It was
gathered during the course of the field survey, that in
the preceding years, agricultural labourers,
particularly the scheduled caste households, ware not
allowed to become the members of MPCSs. Even if a
scheduled caste household possessed a milch animal the
milking as such was done by the milk vendors themselves
166
by using their own vessels. But at the time of the
field survey, the picture seemed to have changed, to a
certain extent, as reflected in Table 5.2.
As seen in Table 5.2, only in four MPCSs
Kadathur, Sholamadevi, Pongalur and Vadugapalayam it
was found that S.Cs were also admitted as members along
with others.
MPCSs were
In Kaniyur and Madathukulam the members in
exclusively S.Cs and in Sholamadevi a
separate society was organised exclusively for the
Muslims who lived there. It was disheartening to note
that in Kandiyan Koil the S.Cs were not allowed to
become members in MPCS, though they
considerable portion of the total population
village.
167
formed a
in that
Tabl. 5.2
H.ob.rship and Daily Milk Procur ••• nt in the S.I.ct.d MPCSs
51 H ... of the yillag.s Total Out of Th. y.ar Total 1M of which P.r day Milk No where HPCSs are Villag. Ioilich in which eel- ----- Procure •• nt
si tUlted Popuh- SC the HPCS bers loan S.C. in lttru) tion Popu- started .eo- lel-(1991 lation bers b.rs Mini- MIXi- At thl census) lUI lUI iii' of
dah collec-tion
~l
1 Ariyanlchi Pallya. 1447 Nil 1994 137 42 Nil 150
2. Kadathur 2780 978 1975 356 195 110 300 720 300
3. Kaniyur. 6550 NIl 1975 298 125 Hi I 100 300 100
4. M.dathukul .. 9105 2276 1974 160 90 160 70 200 75
5. Rudnp.hy .. 2454 NIl 1975 375 190 Nil eo 190 B5
6. Shol ... d.yi" 4513 1504 1992 45 30 30 40 ~ 40
~11
7. Kandiyan Koilllt 6238 1403 1975 130 Nil Hi I 50 150 150
8. Koyilp.l.ya. Pudur 1625 252 1974 170 19 Nil 250 350 250
9. Pongl!ur 4714 1252 1975 174 8 6 50 150 60
10 V.d .. alai p.l.yaa 3407 829 1975 94 Hi 1 Nil 100 150 150
\I Vaduga P,hy .. 2584 461 1972 241 65 35 3BO 625 420
---------NIl I Not available
• Two lOr. Soci.ties were functioning. one exclusively for SCs and the other on. for non S.Cs.
II : One lore society was functioning exclusively for Muslims in this Yillage.
flf : SCs .ere not allowed to b.co •••• mh.rs of the society in this village.
168
Selected Beneficiaries' Access to Bank Credit
In the first place, it was found that the
relationship between the bank and the small borrowers
was not direct. That is, the block administration
decided the scheme for the beneficiary and the subsidy
amount thereof and according to that the banks were
asked to sanction the loan amount. The purchasing
committee (formed at the block level consisting block
officials, veterinary doctors and representatives from
financial institutions) would purchase the milch animals
and distribute them to the selected beneficiaries. All
the selected beneficiaries reported that they were not
involved
animals.
or consulted while purchasing the milch
the So, right from the beginning
beneficiaries' access to information about the scheme
(here quality of the milch animal), loan amount, subsidy
amount and repayment procedures was found to be limited.
The NABARD has had issued guidelines to
sanction subsequent loans (second loan) to enable a
beneficiary to become financially sound. To know the
performance in the provision of second loans, the
details regarding this issue are gathered and analysed
here.
169
Nearly half of the selected beneficiaries in
block I (from all the three categories) and 25 out of 66
beneficiaries in block II opined that though they
frequently approached the banks for the second loan
through the secretaries of milk societies despite their
being
their
regular in supplying milk to the milk societies,
applications were not forwarded. A few
beneficiaries did succeed in securing a second loan.
However, some of them mentioned that the second loan was
adjusted against the repayment of outstanding first
loan, while in few other cases the subsidy component
of the second loan was adjusted for the arrears of first
loan (Table 5.3). These adjustments were done at the
bank-branch level to show an impressive performance in
loan recovery. This was indeed confirmed by the bank
officials, who explained that this they were forced to
do to get the sanction of funds for new loans.
The blockwise analysis regarding the provlsion
of second loans to the beneficiaries covered by the
present study gives the following details:
Out of the 35 first-loan beneflclarles who
app li ed for a second loan in block I, only 15 (42.8 Xl
got the sanction. However, out of this only 8 loans
were given fully; 5 loans were adjusted for the overdues
of first loan; and in the case of remainlng two loans,
170
Table 5.3
Nulber of Bentfici,ries ~plied for and Sanctiontd of Second Loan
-------------------------51 Particulars No.
Block I Block 11 --_._-------- ---
"'rgin,1 SI,II Agricultural ",rginal Soall Agricultural far.ers farltrs Labourers far.trs faraers Labourers
S.Cs Othtrs S.Cs Others
6r.nd Totll
----------------------.-----------Tohl ll10btr of beneficiaries selected 27 22 49 10 2S 16 27 II 1B1
2 ll1,",er of Beneficiaries
il ~plied for second loan 14 10 8 3 9 9 4 3 60
iiI Sanctioned second loan 6 6 2 2 18
3 Nulber of Cases in which
i I the second loan uount is ,djusttd for tht oyerdues 01 the first loan 2 5
iiI The subsidy is adjusted for tht overdue of
3 first loan 2
iiilThe beneficia-ries got the
10 full uount 3 4
----------
171
the subsidy amount was adjusted for the overdues of
first loan. In block II the relative picture was poorer
still: out of the 25 first loan beneficiaries who
app lied for a second loan, only 3 <12 Yo) got it
sanctioned.
labourer got
Moreover, not a single agricultural
a secpnd loan in block II. However, in
Block I, one agricultural labourer got the full amount
out of the three loans sanctioned to this category
(T ab 1 e 5.3).
Selected Beneficiaries' Access to Veterinary Services
As explained earlier, in block I, three
four veterinary dispensaries were functionlng With
veterinary sub-centers; in block II only one veterinary
dispensary functioned with six veterlnary sub-c~nters.
With the gradual spread of veterinary facilities, the
selected beneficiaries could be deemed to have a
'formal' access towards them. However, the effective>
utilisation of these facilities depended on the status
of the beneficiary and his contacts with the president
or secretary of milk society. Almost aU the
agricultural labourers in both the blocks complained
that they were not properly served by the Veterinary
staff even in case of emergency. The small and marginal
farmers in the remote villages expressed that the
172
veterinary staff's visit to their milk societies was
highly irregular. They complained that in case of
emergency the veterinary doctors themselves would go to
big farmers' houses only and got paid for that. All
others had to take their milch animals to the veterinary
centers or to the milk societies, which the veterinary
doctor would visit once a week or a fortnight.
Selected Beneficiaries' Access to Cattle Insurance
A special feature of dairy animal loans is the
lnsurance of animals. The cattle insurance is necessary
since the cross-bred milch animals are prone to diseases
if not maintained properly. That is the reason why the
cattle insurance was compulsorily done at the time of
giving the animals to the beneficiaries. To know the
awareness on the part of the selected beneficiaries
about the cattle insurance, the answers to the "following
questions were elicited. Whether their animal is
insured or not, what is the premium they have paldJhave
to pay, and whom and how to contact the concerned
officials if the animal dies, that is, how to claim the
insurance when the animal dies. The results are
presented in Table 5.4.
173
Table 5.4
Th. Awareness of Selected Beneficiaries About Cattle lnsur>nc, 5ch •• e
Sl Particulars No.
Totol mllber of Beneficiaries selected
2 ~tr of Beneficiaries Mho
il do not know my thing about cattle insuranc.e
i j) aware that their cattle 15 insured
iii) have knowledge aboot the prelillll md p roc edures of insuranct! chils
Block I ------------ ---
Block II 6rrod Tot,l
Marginal Small Agricultural Marginal Soall Agrlcultural farmers tarlers labourers hrlers farlers Labrurers
27
9 (33.3)
II (40.7)
7 (25.91
S.Cs Others
22 49 10 25
II 34 6 7 (50.0) (69.4)(60.0) (28.0)
7 9 2 II (31.8) (18.41(20.0) (44.0)
4 6 2 7 (18.2) (12.2)(20.0) (28.0)
------------------
16
3 IIB.71
10 (62.5)
J 118.71
S.Cs Others
27 II 187
20 7 97 174.1)(63.6) 151.9)
5 2 57 118.51119.2) 130.51
2 2 17.4)(18.2) (17.6)
Figures in par.ntheses are percentage. to the total nwoller of beneficiarIes In .,ch
category/block.
174
From Table 5.4, it is clear that 60
beneficiaries out of 108 in block 1 and 37 beneficiaries
out of 79 in block II did not know anything about cattle
insurance. In other words, nearly 56 per cent of the
beneficiaries
beneficiaries
in block I and 47 per cent of the
in block II did not even know that
cattle was insured. This percentage is correspondingly
more in the case of agricultural labourers belonging to
scheduled castes. Even among those beneflclaries who
were aware that their animals were insured, the number
of beneficiaries having knowledge about the premium to
be paid and the procedures of insurance clalms was far
less. On the whole, only 17.6 per cent of the
beneficiaries
comparatively
in both the blocks were
adequate knowledge about the
found havlng
details of
cattle insurance. Accordingly,
the selected small borrowers'
it may be concluded that
access (in the sense of
their knowledge about cattle insurance scheme and its
benefits) to cattle insurance was rather limited.
Possession of Cattle Shed/Shelter for Animals
The cross-bred animals need to be protected
from the sun and rain to get good milk yield. For this,
the beneficiaries require cattle sheds. In the present
context, those beneficiaries who provided shelter for
175
animals may be divided into two groups: (i) those who
have properly built tiled sheds (pucca) and (ii) those
having cattle sheds with thatched roofs and walls made
out of coconut/palm tree leaves (kutcha). It is evident
from Table 5.5 that the milch animals were poorly
maintained by almost all the agricultural labourers in
both the blocks. (Majority of them in block I had no
shelter and kept the animals in open space and in block
II the situation was somewhat better in that they housed
Table 5.5
Possession of Cattle Sheds by the Selected Beneficiaries
Block I Block \I ------- -----
Total No.of beneficiaries hav, Total No.of benefiCiaries have
Catogory of Beneficiari!5
I. Margin,l fal'tlers
2. Sa,l1 hl'tl.rs
3. Agricul turi! hbourrrs
i) SCs
iii others
Total
No.of benefi-daries
27
22
49
10
108
-------------- No.of No Kutcha Puce a benefi- No Kutch, PUCCi shelter daries shelter
7 11 9 25 b 14 5
5 B Ib 2 5
44 4 27 11 Ib
7 3 11 b 5
b3 27 18 79 « 10
176
the animals in kutcha shedsl. The picture with regard
to small and marginal farmers also was no better for
majority of them kept the animals in kutch a sheds. On
the whole, only 18 out of lOB beneficiaries (16.7Yo) in
block I and 10 out of 79 beneficiaries (12.6Yo) in block
II had pucca cattle sheds to house the milch animals.
Utilisation of Dairy loans
The aspect of utilisation of the schemes by
the small borrowers, in other words, their ability to
keep
in
the animals against the odds assumes signiflcance
the context of risk bearing ability of such
borrowers. At the time of field survey, was
ascertained from the selected beneficiaries whether they
possessed still milch animals which they had bought wlth
the help of bank loans. To the extent possible the
physical verification was done. The reasons provided by
the beneficiary for the sale of milch animals were cross
checked wherever possible. The sale of animals,
whatever may be the reason, by the beneficiaries has
been termed here as misutilisation of the scheme. The
data collected with respect to this problem has been
presented in Table 5.6.
177
Tabl, 5.b
Utilisation of Qairy loans by th, S,l,ct,d B,n,fici.ri,s
--------------------------------51 Pirticulirs No.
NuAb,r of ben,fici.ries selected
2 Number of beneficaries sold the anlla1
3 Reasons for the sale of ani.al l
i I due to low .ilk yi.ld
ill Fodder shortage
iii I Oth,r reasons
Block I Block II
Marginal 50all Agricultural Marginal S.all Agricultural hr.ers far.ers labourers hr.,rs hro,rs labour,rs
27
3 (I!.\!
2
S.Cs Oth,rs
22 49 10
4 14 2 I1B.21 (28.6)(20.01
3 5
b
3
25
3 112.01
Ib
2 ( 12.51
2
S.Cs others
27 11
~ 1 114.81 (9.11
Grand Toti!
187
33 (17.bl
18
9
b
---------------------------------------------------Figures in parenth,ses ar, perc.ntages to the total nwober of beneficiaries.
Table 5.6 reveals some interesting points. As
high as 28.6 per cent of SC labourers (14 out of 491 in
block I sold their animals. Majority of them sold
because of fodder shortage and the low milk Yield from
the purchased animal. Due to low milk yield, 3 small
and 2 marginal farmers in Block I and one marginal
178
farmer and 2 small farmers in Block II sold their
animals. The non-SC agricultural labourers in block I
misutilised to the extent of 20 per cent. As far as
block II
15 and
is concerned the misutilisation percentages are
9 for SCs and non-SCs respectively. On the
whole, a sizeable number of the beneficiaries (18 out of
33) who sold their animals reported that it wa,. not
remunerative to keep them since the milk yield was very
low. Added to this discomfiture was the fact tha t the
animals were purchased at a high cost by the Purchasing
Committee. The next major reason to sell the
was fodder shortage which was more pronounced in block I
compared to block II. The other reasons were lack of
shelter (1 case), death of calf (1 case) and contlngency
to meet the unforeseen expenditure (4 cases).
up, the overall percentage of misutilisation was 17.6.
In other words, 33 out of 187 beneficiaries selected for
the study sold their animals, for the reasons stated
above, at the time of field survey.
In what follows, by leaving aside the
misutilised cases, the investment made on the dairy
animal by the selected beneficiaries who were utilising
the scheme and its impact on their income and employment
levels are analysed.
179
SECTION II
Investment in Dairy Scheme
After the sanction of loans alon9 with the
subsidy* the Purchasing Committee would purchase the
milch animals in bulk to distribute to the
beneficiaries. The selected respondents of the present
study pointed out two problems in this process.
Firstly, when the purchase of milch animals was
undertaken in large numbers, it created a psychology of
scarcity in the supply of milch animals in the market.
This psychology of scarcity in the market was exploited
by 2 the traders, to their advantage, by hiking up the
prices of animal to be sold. Secondly, In some cases
the officials in collusion with the traders purchased
the low quality animals (quality of the an ima I is
measured in terms of its age, breed and milk Yield) at a
higher price. The net result was the investment became
costlier to the beneficiary.
* The subsidy component is determined according to the economic category of the borrowers and also their caste. For example, during the reference year, in the study blocks, the subsidy amount for a small farmer was 25 per cent of the loan, for marginal farmers and for non-Se agricultural labourers it was 33 per cent, and for se agricultural labourers it was 50 per cent of the loan.
180
The details about the average loan and subsidy
amount sanctioned to the selected beneficiaries and the
actual amount spent to purchase the animals are given in
table 5.7.
Table 5.7
Investlent Hade in Dairy Sche.e by the Selected BeneficIaries
C,t.gory of Beneficiaries
Block I
Average AoIount Sanctioned Actual (in Rs.l Amount
Spent to Credi t Subsidy Total purcha ..
the ani.al
I. So,ll farlers 2080 bbO 2740 2500
2. H'rgind far.us 2150 650 2800 2500
3. Agricul turd Labour.rsl
i I S.Cs 2500 1250 3750 2760
iiI Others 2500 690 3190 2700
--- -----------------
181
Block II
Average Amount SanctIoned Actual (in Rs.l Aoount
Sp.nt to CredIt Subsidy Total purchase
the Ini .. 1
2000 500 2500 2370
2000 665 2665 2450
2000 1000 3000 2500
2000 665 2665 2400
It is clear from table 5.7 that there is a
difference between the amount sanctioned and the actual
amount spent on purchasing the animals. The difference
is as high as at Rs.990 in the case of agricultural
labourers belonging to scheduled castes in block I and
Rs.500 in the case of their counterparts in block II.
However, the officials point out that a considerable
amount goes as incidental expenditure as they move from
market to market - within the district and sometimes
outside the district also - for the purchase of animals
and a part of the expenditure is incurred on
transportation of animals from market to villages.
Changes in Income Levels of Small and Marainal Farmers
For
beneficiaries
the analytical convenience
are divided into two groups : small
the
and
marginal farmers as one group and agricultural labourers
as another group. Agricultural labourers in turn are
classified into two sub-groups as se's and others
because the subsidy amount differs with caste.
To find out the changes in income levels of
the selected farmers after the dairy loan the mean
incomes have been worked-out : before and after the loan
assistance and mean differences in lncome have been
tested for their statistical significance. Further, the
182
net income earned from dairy enterprise alone by the
sample beneficiaries is calculated by divldlng the
farmers' income into three groups: net farm income, net
non-farm income (the -non-farming activities include
hiring out of labour, hiring out of bullocks and carts,
petty trade and services) and net income from dairying.
This would give an easy method to find out the
differences in dairy income accrued to the beneficlAry
by undertaking dairy loan. The results are given in
Table 5.B.
Table 5.B
Change in Incooe Levels of Selected Soall and Marginal Faroers : Testing of M.an Differenc. Betw •• n Pre and Post-loan periods.
Block and Category of Far •• rs
Net Far. Incoo. Net Non-faro Incoo. Net Dairy Incooe
Mean Mean t H.an Mean t value Valu. value value Valu. value (8.for.) IAfter) (Before) (After)
"ean ".an value Value (B. for.) (Aft.r)
t value
-------------------------------------------
~l
I. Harginal ns ns Far.ers 3383 3478 0.9200 500 61B 1.5072 3bO 1746 6.6564.
2. SIIal I ns ns Far.ers 7065 8109 1.5819 559 631 0.9428 457 1531 4.46981
~ll
I. "arginal ns ns Fan.rs 2479 2561 0.2908 547 565 0.1336 227 635 4.6592.
2. Sull ns ns Far.ers 5800 5861 0.0756 633 713 0.4758 478 B22 1.34931
----------------------------------------------Note : 1 - Significant at 1 per cent level
ns - Not significant
1B3
The calculated net income data shown in Table
5.8 are in money terms and to that e~tent fail to bring
out the change in income in real terms. However, SlnCe
the reference years pertaining to pre and post-loan
periods are quite close, the estimates would not be
affected in a serious manner.
It is clear from Table 5.8 that in the case of
small and marginal farmers in both the blocks no
significant change was found in their net farm income
and net non-farm income between the two periods, but the
increase in their net dairy income between the two
periods was found highly significant (1 per cent level).
It may be observed further that in both the Blocks the
size of increase in net income under dairYIng was
comparatively more in the case of marginal farmers than
in the case of small farmers; and marginal farmers
Block I benefitted more than their counterparts in Block
I I •
The reasons for the differential income
from dairying between the groups and blocks could be
well illustrated by taking into account the amount of
investment made on dairy animal, feeding practices and
the composition of family income. The price of milk is
184
the same in both the biocks since it is collected
through MPCSs and the price is determined on the basis
of fat content. However, the average investment made on
the milch animal is low in block II, as e)(plained
earlier, than in block I and this is the maln reason for
the low income since the low value animal (which is an
index of the quality of the animall yields less quantity
of milk per lactation.
And, the differential in dairy income betw~en
the blocks is because of the fact that the block I is
having more irrigated lands and the availability of the
green fodder to the small and marglnal farmers lS higher
compared to the block II which is a dry block.
Incremental Income-Investment Ratio
The investment per dalry animal by the
selected farmers has been already given and the
incremental income has been arrived at by deducting the
net dairy income (beforel from the net dairy income
(afterl for each category of farmers. This would help
to workout the incremental
for each group of farmers.
income-investment ratios
The worked out ratios are
given in Table 5.9. This would furnish an idea of the
return on investment in dairy scheme to the small and
ma"rginal farmers in selected blocks.
185
Table 5.9
Incr •• ental IncOl.-lnvestoent Ratio Per Unit of Dairy Enterprise
-----------------------------------------Block I Block II
Cltegory Investoent Increoental Incremental lnvestoent Increlental Incr ... nhl p.r untt inc one IncOllle per uni t inco.e Incoo. IRs. ) per uni t Invest.ent (Rs. ) per unit investotnt
IRs. ) Ratio IRs. ) Rltio ------------------------
I. Marginal 2500 1386 1 :0. 554 2450 408 1 :0.167 Far.ers (2800) (1 :0.495) (2665) 11,0.153)
2. Small 2500 1074 1:0.430 2370 344 110.145 For.ers (2740) 11:0.392) (2500) 11:0.138)
-----------------------------------------------Nole: Figures in parenth.s.s are actual a • .aunt of loan sanction.d and the
corr.sponding I-I ratios.
In Block-I the rate of return per rupee
invested is higher in the case of marginal farmers
followed by the small farmers. However, it 15 very low
in the case of small and marginal farmers in block II.
The point to be emphasised here is that when tile
Incremental Income-Investment ratio is worked out for
the actual loan amount sanctioned, the ratios turned out
to be very low as shown in Table 5.9. Had they
purchased the animals for the entire amount without any
leakage (animals with higher milk yield), the rate of
return would have been higher than what is given here.
This point will be further analysed while discussing
about the viability of the loans.
186
Changes in Employment Levels
One of the LharaLteristiLs of small and
marginal farmers Lompared to large farmers is the use of
more family labour in their farming aLtivitles.
Nevertheless, their landholding size belng limited they
may not be in a position to work all the days in a year
on their own farms. In these LlrLumstanLes they have to
find additional employment either on large farms or
outside the agriLulture. However, the possibility of
getting additional employment on large farms is also
limited, among others, due to low intensity of Lropping
(mainly due to insuffiLient water supply in summer
season). Further, it was gathered" during the field
survey that the availability of non-farm employment also
was limited. In sULh LirLumstanLes it may be expeL ted
that the provision of milLh animals may inLrease not
only their inLome levels but also employment levels. To
test this hypothesis the Lhanges in employment levels of
the seleLted farmers between the pre-and post-loan
periods have been worked-out.
As was done in the Lase of income analysis,
the employment levels also are dlvided under three
headings farm employment,
employment in dairy farming.
given in table 5.10.
non-farm employment and
The worked out details are
187
Change
Block and Cat'gory of Fnaers
~l
I. "a"9inal Far •• rs
2. Slall Farl.rs
~ll
I. Marginal Fnaers
2. Sull F ..... rs
Table 5.10
in the Emplay.ent Levels of Selected Soall and Mar9inal Far.erg : Testing of Hean DIfference Between Pre-and Post-loan perIods
(Han days of 8 ~rklng hoursl -------------------------------------
Far. Emplay.ent
Hean Hean t valu. Valu. valu. (Befarel (Afterl
204 227 2.5376'"
291 317 3.9754>
170 194 6.0320>
216 226 1.7>"
Non-far. Employeent
Hean Hean t value Value value (Before I (Afterl
ns 57 62 O.b452
ns 29 30 0.2288
ns 31 33 0.5258
ns 34 3b 0.J395
Eoploy.ent in Dairy F art!lng
----------Mean Hean t valu. Value value (Beforel (Afterl
151 24. 'lB'14I
197 13.4055-
33 134 9.92311
31 140 6.1501-
-------- -----Note : - - Significant at I p.r cent !eve 1 .. - Significant at 5 per cent level
tff- Significant at 10 per cent \eve 1 ns - Not signi ficant
Small farmers in block 1 and marginal farmers
in block II have registered a significant increase (at 1
per cent level) in their farm employment levels compared
to the other groupS. However, non-farm employment level
of none of the groups has improved between the two
periods. As far as changes in employment due to
dairying is concerned, it is found that the employment
188
levels have increased significantly (at 1 per cent
level) for all the farmers in both the blocks. This
indicates the employment potential the dairying has on
the small and marginal farmers.
Changes in the Asset Position of ~ Selected Farmers
Another aspect to be looked into wh i Ie
evaluating the dairy scheme is the change in the asset
position of the beneficiary farmers. The assets of the
selected farmers were grouped into two as physical
assets (land, implements, buildings, household utensils
and other durables) and livestock (cows, buffaloes,
bullocks, goats, and sheep). The value for these items
has been imputed in accordance with the prevailed market
price in the area.
It can be seen from Table 5.11 that before the
loan the value of livestock formed only a small
percentage to the total asset value. However, after the
loan, though no change In the value of physical
is found, the value of livestock to the total
assets
assets
has appreciably increased in the case of both small and
marginal farmers of both the Blocks. This has been due
to the milch animal given to them and the calves they
acquired thereafter. The net change In the value of
assets worked out to Rs.3695 in the case of small
189
Table 5.11
Value of Assets Before and After the Loan Period of the Sele~ted Farmers
--------------------------------------------------------Average Value of Assets per Household
Particulars Block I
Marginal Small Farmers Farmers
Block II
Marginal Small Farmers Farm~rs
-------------------------------------------------_._-----a. Physical
assets ( in Rs.)
b. Livestock (Rs. )
Percentage of Livestock value to the total Assets
23740 (23700)
4':'47 ( 1555 )
16 (6)
28400 (28000)
4985 ( 1690)
15 (6)
10370 (10600)
4184 (840)
40 (8 )
15':'00 ( 15300)
4047 (':'50)
21 (4)
--------------------------------------------------------Note:
farmers
block
Figures in parentheses are denoting the average value of assets per household before the loan.
and Rs 3132 in the case of marginal farmers in
I and ln block lIlt was Rs 3697 and Rs.3114
respectively, for the small and marglnal farmers.
Total Income of the Selected Farmer Hpuseholds
The total income of the households consists of
the net incomes from farming, non-farming and livestock.
The details of total in~ome of the beneflciary
households category-wise and block-wlse are glven ln
Tab 1 e 5. 12.
190
51 Sources of No Inc"".
I. FaNling
2. llon-hNllflg
3. Livestock
Tohl Net Change
Table 5.12
Changes in Total IncDle of Per Beneficiary Soill and Marginal Faraer Households in Selected Blocks.
!In Rsi.
Block I Block II
MaNjin.1 Fara,rs Soall Far.ers ------- -------Before After Before After
--------------3383
500
360
5842
me
618
1746
BB4S 15qq
7065
559
457
BOBI
8109
631
1531
10271 2190
Marginal Far.ers ------Before
2479
547
227
3253
After
25bl
565
635
3761 50B
-------------
a..11 FaNle"
Before After
SBOO 5901
b33 m
478 B22
69\1 7396 485
It is seen from Table 5.12 that the total
income of the beneficiary small farmers households in
black I has changed significantly (Rs.21491 between the
two periods followed by the marginal farmers of the same
block (Rs.15491. However, only a marginal change in the
income of small and marginal farmer households was found
In block II.
In addition to above analY5is, the income
levels of benefICIary farmers were compared WIth the
income levels of non-beneficiary small and marginal
farmers to know the difference that exists, If any,
between these two groups. The details are glven In
Table 5.13.
191
MARQINAl. FARMERS 6MAll FAAMERS
• •
T T T T h • h • 0
o • u •
• • u a • • • n •
d • n
• d
0 ~INO NO ..... FOOVING lIVESTOCIt "'FlWING NON-PORa.tNQ LlYUTOCK -. .- ~AltM -- ~., ...
BLOCK I BLOCK I
'" N CHANGES IN INCOME OF BENEFICIARIES
MARClNAl. FARr.IERS SMAU._
• •
T T T T h
o • h •
u • 0 u • • • • • a a n a
d • n
• d •
0 0 ~RWINQ NON--FORWlNQ UVlS'fOC,I{ flt..RI.UNQ NotH'ORWlNQ LM!8TOCK
= ..... ~AI ... !!!III_*- ~U.r
BlOCK II BLOCK II
Table 5.13
Totll !nccae Per Ben.ficilry and non-beneficilry Sial I and Marginal Filra.r IbJstholdo.; in Selected Blocks
Sl Sources of Block I Block II No Inccae ----------------
Harginal Faraers Soall Faroers Marginill Faroers Saall Filrae"" --------- -------Benefi- Non- Benefi- Non- Beneh- Non- Ben,h- 'iln-ciary Benefi- ciary Benefi- ciary Benefi- ciary Benefi-
ciary ciary ciary ciilry ---------------------
Faraing 3478 3400 8109 71>00 2561 2450 5abl 5b70
2 Non-faroing bl8 abO 631 '150 565 b40 m 850
3 Liyestock 1746 m 1531 m b35 240 822 280 ----- ---------------
Total 5842 4533 10271 8845 37M me 7396 b800
The level of income of the non-beneficlary
households of both small and marginal farmer$ in the two
blocks was found lower than the beneficiary households.
They continued to supplement their income from non-
farming sources <mostly from hiring out of labour) and
were receiving only a meagre income from livestock. And
this shows the relatively better position of beneficiary
farmers over the non-beneficiary farmers.
Production Function Analysis
The production function analysis was used for
both the groups in the two blocks. The results of the
analysis are given in Table 5.14.
193
Table 5.14
Milk ProductiOll FunctiOlls for Stoall and Marginal Far •• rs of the Selected Blocks
------------------------------------------------------------_.----------------------------------REGRESSIOO CQ-EFFlClENTS Block and
Cat.gory ------------------------------------------------------------
---_._---------------------------------------------------------
eJru 1
1. Marginal 0.2381ns 1.0330' _O.O·173ns (1.3846)0& 4.0672" 0.78 •
Far •• rs <0.428) (4.9345) (-0.3407) !O.4592) 11.9790)
2. S.all Far •• rs 0-0221ns 1.3992' 0.4n9
f1 _2.b856ns
O.I734ns
0.90 • 10.0758) (8.0419) (1.7) (-0.7747) (0.1320)
eJru II
Marginal -0.9502' 1.4867' 2.9642' 14.64bbns
5.2984n5
0.73 ,
F .... rs (-2.7726) (3.8159) (2.7850) 11.2211) (0.7400)
2 Sull Far."s 0.3426ns 1.5970' 0.0416
n5 -3.5263n5
-16.5Imns o.n'
10.6882) 14.bl87) (0.0349) (-0.3162) (-2.b262)
Note I , - Signi ficant .t I per c.nt \ev.l .. - Significant at 5 per cent \ev.l ns - Not signi ficant
It is interesting to note that the variable,
expenditure on concentrates (x2) is hlghly significant
(at 1 per cent level) in all the four caseS. The highly
significant share of the concentrates in the value of
milk production reveals the fact that the milk price
depends on the fat content of the milk and in turn the
fat content is determined by the composition of
concentrates loil cakes, cotton seed, rice bran, etc. )
194
fed to the animals along with fodder. In respect of
fodder (Xl) the small and marginal farmers are feeding
their animals with their own-fodder and.being inadequat.
are also taking out the animals for grazing in the waste
lands. However, the grazing lands availability is
limited in block I but green fodder availability is
relatively more; in block II the grazing lands
availability is relatively more but green fodder supply
is very limited. The value of fodder, is found to be not
significant in influencing the mIlk yield; In fact, In
the case of marginal farmers in block II it shows a
nega.ti ve relationshIp with the mIlk y,eld implYIng that
the grazing of milch animals in waste lands has not
influenced the value of milk productIon. The varIable
labour expenses (X3) is found SIgnificant In the case of
small farmers in Block I and marginal farmers In Block
I I . The other two variables veterinary expenses (X 4 )
and other expenses (X5) are not found significant.
2 The values of R , the coefficient of multIple
determination, are significant at 1 per cent level in
both the blocks. The five variables Included in the
milk production function explained 90 per cent of the
variation in the gross output or value In the case of
small farmers; it explained variations upto 78 per cent
in the case of marginal farmers in block I. In bloc k I I
195
e~plained 77 per cent of variation in the mllk
production in the case of small farmers and 73 per cent
in the case of marginal farmers. The remainlng amount of
une~plained variations may be due to the variations in
managerial practices, age of the animal and such other
factors not included in the analysis.
Thus, the availability and use of concentrates
by the small and marginal farmers highly influences the
value of milk production and the differences in their
income levels can be attributed mostly to this variable.
Repayment Performance of Selected Small
Marginal Farmers
The information about the repayment of daIry
loans by the selected farmers was obtalned from the bank
records, from the SecretarIes of MPCSs and from
beneficiaries themselves. As given in Tabl~ 5.6
earlier, 3 out of 27 marginal farmers, 4 out of 22 small
farmers in block I and 3 out of 25 marglnal farmers and
2 out of 16 small farmers in block I I were not
possessing the milch animal during the time of the
survey. That is, they had sold them out amountIng to
misutilisation of the loan/scheme. Out of the above
misutilised cases, three small farmers in block I and
one marginal farmer in block II however did repay a part
196
of the loan to the bank, while all the remaining
beneficiary small and marginal farmers did not repay any
amount towards their loan.
Leaving aSlde the above cases, the repayment
performance of the other small and marginal farmers was
analysed and the results are presented in Table 5.15.
Table 5.15
Loan Repayment Performance of Selected Small and Marginal Farmers
51 Particulars No.
1 Number of Beneficiaries studied
2 Number of BenefiCiaries
i ) Fu lly repaid
i i ) Partly repaid
iii ) Regularly paying instalments
iv) DefaUlted
Block I Block II
Marginal Small Marginal Small Farmers Farmers Farmers Farmers
24 18 22 14
18 10 8 7 (75.0) (55.5) (36.4) (50.0)
1 2 9 4 (4.2) (11.1) (40.9) (28.6)
3 3 1 2 <12.5) (16.7) ( 4.5) (14.3)
2 3 4 1 ( 8.3) <16.7) <18.2) ( 7. 1 )
Figures in parentheses are percentages to the beneficiaries studied.
total
197
The repayment performance of the selected
small and marginal farmers in block I was found
satisfactory as shown in Table 5.16. Out of 24 marginal
farmers
repaid,
remaining
farmers,
18 (75 %) repaid the loan fully, one partly
three were in the process of repayment and the
two were defaulters. In the case of small
10 out of 18 (55.5%) repaid fully, two repaid
partly, 3 were regular in repayment of instalments, and,
however, another three farmers were defaulters.
In block II the performance of small farmers
was found better compared to the marginal farmers. Only
8 marginal farmers out of 22 (36.4%) repaid the loan
amount completely, 9 partly repaid, one was regular in
repayment and 4 were defaulters. But in the case of
small farmers 7 out of 14 (501.) fully repaid, 4 partly
repaid, 2 were regular in repayment and only one small
farmer was a defaulter in repayment.
One important reason for the good repayment
performance of small and marginal farmers in block I and
small farmers in block II and the moderate performance
of the marginal farmers in block II is their membership
in MPCS. The milk society and the bank together evolved
an arrangement in which the loan amount is deducted from
the value of milk supplied by the beneficiary in regular
198
instalments. The loan amount due is collected mostly
during two lactation periods and in a few cases in one
lactation period ,itself. A few farmers who had
animals other than the one bought with the help of
loan could easily repay the loan.
milch
bank
Those beneficiary farmers who were found to
have partly repaid the loans were also members ln
they could not get adequate income from the
MPCS,
supply but
of milk to the MPC5. So, the loan amount could not be
fully
This
long
recovered, even after two or three lac tat ions.
is mainly due to, apart from the low milk yield,
inter-calving period (the gap between
lactations) in the case of many milch animals. If
two
this
period exceeds three or four months, it becomes
uneconomical to the beneficiary. The timely veterinary
service becomes crucial (the artificial insemination is
done in veterinary hospitals and veterinary sub-
centers) ; however, the beneficiaries' aCCQSS to
veterinary services was found to be limited.
Beneficiary-farmers who were paying tne loan
instalments regularly were also those who were
supplying milk regularly to the MPCS. This was verified
from individual pass books (supplied by the MPCS). The
199
chances of recovering the entire loan amount from this
group of beneficiaries are quite bright as
regularly supplying the milk to the MPCS.
it is
Five farmers each in both the blocks were
found as defaulters. In block I these farmers are
supplying the milk to the tea shops/hotels and
better price and in block II they sell to the
get a
private
milk vendors. But they have not deliberately repaid the
loan - a case of wilful default.
Summing uP. two factors: the beneflciary's
membership in MPCS (i.e. tie-up arrangement between
the banks and MPCS) and the milk yield were found to be
influencing largely the loan repayment performance of
the sample farmers. In contrast, non-membership in
MPCS and lack of supervision by the bank and block
officials led to defaults.
200
Dairy Loa~ and Agricultural Labourers
The details about ,the investment made by the
agricultural labourers in the dairy animal and their
utilisation of dairy scheme vis-a-vis their access to
other facilities were analysed so far. In the
following, the impact that the dairy scheme made on the
labourers income and employment levels has been
analysed. •
Mean differences between pre-and post-loan
incomes and their Significance tests are given in Table
5. 16. It is important to note that ln both the Blocks
no change ln the wage income levels of the agricultural
labourers between the two periods was observed. No
was noticed in the other component, name ly change
income from other than wages, as for as the labourers
however, of the block II were concerned. In block I ,
there was a significant decline in the wages from the
above said sources among labourers. This can be
attributed to the reported fact that the children and
a few women labourers in many households, who were
previously engaged in mat-weavlng, beedi rolling,
cowdung
looking
through
these
collecting, and firewood gathering are now
after the milch animal which they received
loan. This has brought down the income trom
sourceS which however is not effectively
compensated by the income increase in dairy enterprlse.
201
T,ble 5.16
C!,"nge~ in IncOll. L."l~ of A<jricultural laboor,rs in 5e\ect.d Bloc" 1cstlng of the Diff,r.nc, Bet.,en Means
-----------------------------------Block and Wag. Incoo. IRs.) Incooe froo Oth,r than lnc~~ froo Dlll)'lng Labour Wag" IRs.) IRs) C~tegory ------------
~ean Hean t Hoan Hean t Mean Mean yalu. Value valu. value Value y,lu. value V,lu, Vi: lu! IB,for.) IAft,r) lBefore) IAfter) 18,for.) IAft,r)
-----------------------------llinl
I. Schedul.d 4681 5287 0.7129ns
219 107 4.m7' 44 }I'I 8.3511' Ca~te~
2 Others 4594 5080 0.2328"5 457 258 2.2751"'· 191 619 4.092S ,
0.749'r , ,
3 All 461.2 5241 271 140 3.9146 76 4()1, 7.8917
llinll
I. Scheduled 2449 2661 1.0742"s 81 79 0.143Ons t
87 462 13.4620 C~stes
0.4484"s 0.4938"S t
2 Others 2670 2854 lOB 94 124 621 10.B405
3 All 2508 2711 1.5212ns
BB 83 0.3458ns
96 503 \5.3155 ,
-----------------------------------------Note, , - Sig"ificant at I per c.nt lev.1
'" - Significant at 10 p.r cent l,v.l ns - Not significant
8Dth the sub-groups In the two blocks have
registered a significant increase in their net lncome
(at 1 Yo level) from dairying. But the level varles
between the blocks and also between the soclal
202
groups. The average increase in net dairy income ln
the case of scheduled caste labourers is Rs 303 in block
I
an
and Rs.375 in block II. 'Other labourers'
increase of Rs.428 in block I and Rs 497
realised
in block
II. Apart from the fact that most of the selected
labourers were provided with low quality animals their
poor maintenance of animals also led to low income
dairying.
from
Incremental Income-Investment Ratio
The investment and incremental income per
dairy animal of the selected agr1cultural labourers and
the incremental income-investment ratios are given ln
Table 5.17.
The rate of return per rupee invested 1S very
low in the case of all the labourers: ranged from 11
paise to 20 paise. Income-investment ratio is still
lower when it is worked out for the actual amount of
loan and subsidy sanctioned to the labourers. If the
labourers had been given the animals matchlng 1n
quality to the actual amount sanctioned, then they might
have realised a higher rate of return.
203
Tab Ie 5.17
Incremental Income-Investment Ratio Per Unit of Dairy Enterpr1se of Selected Agricultural labourers
Block I Block II ------------------------- ------------------------
category of Invest- Incre- Incre- Inves- Incre- Incre-Agricultural ment mental mental ment mental mental labourers per Income Income per lncome Income
unit per Invest- unit per Invest-(Rs. ) Unit ment (Rs. ) Unit ment
(Rs) Ratio (Rs) Ratio --------------------------------------------------------------------
Scheduled 2760 303 1 :0: 110 2500 375 1:0.15 Castes (3750) (1:0.081) (3000) (1:0.125)
2 Othe rs 2700 428 1:0.159 2400 497 1 :0.207 (3190) (1:0.134) (2665) (1:0.186)
--------------------------------------------------------------------
Note: Figures in parentheses are actual loan amount sanct10ned to labourers and corresponding I - I ratios.
Change in Employment Levels
Table 5.18 gives the details of change 1n
employment levels of the selected labourers between the
pre-and post-loan periods. As shown in Table 5.18 no
significant change in wage employment was found among
the labourers in both the blocks. ThiS shows the very
limited possibility of getting employment
204
Table 5.18
Chang. in Eaploy.ent Le,.l. of S,l.ct.d AgrIcultural Labour ... : T'5\1n9 of Dltf,r.nc, Betw •• n Mean.
IAnnual In oandays at 8 worhng hour. 1 ---------------------------.-------------------------------------------------------------------Block Wag. Labour Olher than Wag' Labour Employ.ent In Dal rylng
----------------------- ----------------------- -----------------------Mean Mean I Mean t1ean I Mean Hean "lu. Value "lu. "lu. V.lue "lu. value Value valuE! IB'forel IAfterl (B.for.1 (After 1 IB.fore) (After )
--------------------------------------------------------_.-------------------------------------
e.J.ru 1
1. S.C. 499 521 0.5661 n• 42
Ii 2 Others 396 430 2.6311 52
3 All Labourers 477 501 0.5661 n• 44
alW.ll
5 Cs 259 258 0.3080n5
18
2 Other. 273 283 1.3931ns
28
3 All Labourer. 263 265 0.5388n• 20
Not.: • - Significant at 1 p.r c.nt 1.,.1 ,. - Significant at 5 per cent 1.,.1 n. - Not significant
21 5.4096 t
14 144 18.3135 • 30 3.2212
t 20 204 12.5441
t
• • 23 4.5907 16 157 14.9475
17 0.4990n• 19 • 141 IB.7B25
25 1.3o.14ns
29 155 9.5490 •
19 0.499On• 21 144 22.9625'
agricultural operations in the selected areas and the
need for looklng for new avenues. Agaln, no change
respect of employment in other sources was found In the
case of labourers in block I!. In fact, In block I ,
the employment level declined slgnlficantly. HOl'Je v e r,
the increase in employment level due to daIrying 15
205
found to be highly significant (at IX lev~l) for all the
labourers in both the blocks. This is so because,
before availing the diary loans, the agricultural
labourers had only a few goats or sheep and thanks to
the dairy loans for the first time they could acquIre
mIlch animals.
Changes in the Asset Position of Selected Labourers
The assets of agrIcultural labourers were
classified into two physical assets (buIldIng,
utensils, and Implements) and livestock (buffaloes,
cows, sheep and goats). And the changes In their asset
position has been gIven in Table 5.19.
Value
Table 5.19
of Assets Before and After the Loan PerIod the Selected Agricultural Labourers
of
Average value of assets per household (,n Rs.)
Block I Block I I
S Cs Others 5 Cs Others
a. Physical 6060 7800 6134 7668 assets (6000) (7800 ) (6000) (7600)
b • LIvestock 3600 4200 3860 4450 (775) (800) (480) (700 )
X of livestock value to the 37 35 39 37 total assets (6 ) (9 ) ( 7) (8)
Note: F,gures In parentheses denote the average value of assets per household before the loan.
206
As men~lQned already, 1t 1S the f 1 rs t time
that
bank
institutional finance in the form of commercIal
loan has been made ava1lable to maJor1ty of
agricultural 1 abourers 1n the study area for
purpose of dairy enterprise. This
the
the
has specific
resulted
livestock
in tremendous increase in the average
loan,
assets
the
was
value as shown 1n Table 5. 19. Before the
percentage of livestock value to the total
meagre (6 to 9 per cent) per household.
But after the loan, th1s has lncreased to 35 to 39 per
cent per household. However, no change was found 1n the
average value
households 1n
of physical assets of
the corT'esponding per10d.
the
In
labouT'er
absolute
terms the net change in the average value of assets 1S
Rs.2885 for SCs and Rs.3400 for other 1 abou re rs 1n
block I and Rs.3514 and Rs.3818 for SCs and other
labourers respectively 1n block II.
Total Income of the Selected LaboureT's' Households
The tot a I income of agricultuT'al labourer·s
household consists of income from wage labour,
income
sheep,
income
sources
from dairying and also from other sources
goats, piggery and poultry. The average
of the benef1ciary labour households from
mentioned above is given in Table 5.20.
207
net
11k e
net
the
Tabl, 5.20
ChiJlg" in the Incoo, of Per B,n'fiClary Household - Agricultural l,bourers
(In Rs.)
-----------------------------------------------------------------------51 Sources of Block I Block 11 No incoae -----------------------------
Sch,dul,d C,st. Other Sch,dul,d C,st, Oth.r Labourers labourers L,bourers labourers
B'fore After B'fore After B'fore After B'fore Afl" ---------------------------------------------------------------------
W'g' Incoo,
2 Non-wag' Incoc,
3 Incoo, froo 011 rylng
Tot.1
N, I Ch lng,
4681
219
44
4944
5287
107
347
5741
797
4594 5080 2449 2661
457 25B 81 79
191 617 87 462
5242 5957 2617 3202
715 585
The net change in the income of se
2676 2854
lOB 94
124 621
2908 3569
660
labourers
and other labourers in block I comes to Rs.797 and
Rs.715 respectively, but it was comparatively lOllJ for
the same category of workers in block II - Rs.585 fDr
se labourers and Rs.660 for other workers.
208
a-iANG 2S IN INCOM:'; OF BE1'IEFICIARIES - AGRICULTU~L LABOURORS
S C LABOURERS aTHER LABCURERS
, • • •
l~j .. T T h
o • u •
• • a n ,
OJ .. d 2 •
,(d",3 0
"""'. NO*'WI.G. DAlRY """- NO .... """" DAIRY
.ISI'", mATTIR _.'OAI ~}J'TlR
N BLOCK I BLOCK I 0
'" S C LABOUF'ERB OTHER LABOIJRERS
• •
T Tt T h • h 0 0 u • u • • • • n • d
• r-:;r.7/..--v.::4 ...... """""""" """'"
_. UON-....,.. DAIRY
lDiIapQR:I. ~ """" _PfORI ~ATT.R
BLOCK II BLCO< II
Comparison of the Beneficiaries Income
Beneficiaries Income
The details of total income of the
beneficiary as well as non-beneficiary households are
Tab I e 5.21.
Table 5.21
C"",,irlS"" of Tot.1 Inco., of Beneficiary and Non-ben,flciary Agricultural l.bourer Households
IA,erage per household in Rs.l
Block I Block II
SI Sources No of Inco&e
Beneflclary
s.c. Other labou- l.bou-rers rers
Wage Incoo, 5297 5080
2 Non-wage incoae
3 Inco&, Ir"" DaIrYIng
lotal
107
347
5741
When
258
619
5957
Non-Beneficiary BenefiCIary floo-B,n,flcury
S.c. Other s.c. Oth,r s.c. Other labou- labou- l.bou- labou- labou- Libou-rers rers rers rers rers rers
5265 5000 2661 2954 2600 2950
240 475 79 94 110 140
47 180 462 621 65 105
5552 5655 3202 3569 2775 3195
the total household lncome
agricultural labour beneflclaries was compared
non-beneficlary households of the same category,
210
of
wi th
the
difference in their income ~Jas found to be
considerable. Due to the higher income from dairYing,
the beneficiary SC and non-SC households are better
placed than the corresponding nan-beneficiary
households.
Production Function Analysis
All the labourers are conSidered as one group,
without sub-classifying them an the basis of caste for
th I s analYSIS specifically because of the small sample
SIze.
The 2
value of R IS found as 0.91 in the case
of block I and It is 0.99 in the case of block II. The
values being high Imply that the Independent
variables conSidered In the production function are
capable of e~plalning a very large proportion of
variatIons In the dependent variable namely, the value
of milk production in black I and II respectively.
In the case of agricultural labourers In
block I, the variables: fodder (Xl) and concentrates
to be significant (at 1 per cent level)
In explaining the variations in the value of milk
p roduc t ion. On the other hand, in the case of
agricultural labourers in block I I the varlables:
211
Table 5.22
Hilk Production Function Analysis - Agricultural Labourers
------------------------------------------------------------------------REGRESSION COEFFICIENTS
------------------------------------------------------------------------------
-_ .... -------------------------------------------------------------------------
Block I 0.2102' 0.135b • 0.0273ns 0.0102"5 -o.0003
n5 0.91 15.54811 14.68551 10.71b1> (0.81421 (-.24971
8lock II 0.0024"5 0.0914' 0.2875' 0.0027"5 -o.OO8b"S 0.99 (0.3001 13.958b) 110.9093) 10.42421 1-0.91541
---------------------------------------------------------------------, Signifio"t at 1 per cenl leYel.
ns ' not Significant.
concentrates (X 2 ' and labour expenses (X3) are found
to be significant (at 1 per cent level). As noted
earlier the avaIlability of grazing lands IS lImIted
In block I compared to block II. That may be the
reason why much of the variatIons In the mIlk yield 15
explaIned by fodder and concentrates In block I, while
labour expenses and concentrates explaIn much
variations In the milk yield In block II.
212
~ Repayment Performance of Agricultural Labourers
As discussed earlier (Table 5.6) 16 out of 5S
agricultural labourers selected in block I and 5 out of
38 in block I I : tha t is, in all 21 out of 97
agricul tural labourers in the study area sold their
animals mainly due to the low milk Yleld and fodder
shortage. Out of the 21 labourers who sold thelr
animals,
1 abourer
only three labourers 1n block I and only
in block II repaid the loan partially.
one
The
remalning labourers did not repay any amount since they
sold the an1mals wlth1n one or two months after the
purchase of such anlmals. We could gather In the
course of the field survey, that no supervlslon was done
either by
officials,
the bank officials or by the block
and also no stringent measures were taken
against those who misutilised the loans, wlth the
resul t loan amount due from these labourers could not
be recovered.
The loan
labourers who were
repayment performance of
found utilising the scheme
the
has
been analysed with the help of the 1nformatlon obtained
from the records of the banks and MPCS. As most
the selected labourers were 111 iterates
knowledge and acquaintance with bank and
records/pass books were found very much llmited.
213
of
the1r
~IPCS
They
were not given correct figures about the amount of
loan and subsidy, the amount to be repaid and the
interest rate. So, the information collected from these
labourers were cross-checked with the bank records and
MPCS Secretaries. The particulars are given In Table
5.23.
Table 5.23
Loan Repayment Performance of the Selected Agricultural Labourers
51 No.
1
2
1 )
Particulars
Number of beneficiarIes studied
Out of which, number of benefIcIaries
Fu 11 y repaid
Il)Partially rep aid
i i ilRegul arly paying instalments
iv)Defaulted
Block I
Agricultural Labourers
SCs Others
35 8
8 4 (22.8) (50.0)
6 ( 17. 1 )
9 3 (25.7) (37.5)
12 1 ( 34 • 3) ( 1 2 . 5 )
Block II
Agricultural Labourers
SCs Others
23 10
4 2 ( 17 • 4 ) (20. 0 )
4 3 ( 17. 4) (30. 0)
7 4 (30.4) (40.0)
8 1 (34.8) <10.0)
Grand Total
76
18 (23.7)
13 (17.1)
23 (30.3)
22 (28.9)
Figures in parentheses are percentages to total number of beneficiaries studied.
214
high
•
The percentage of default Cases was found verY
among the S C agricultural labourers In both the
blocks compared to other labourers, the overall default
rate being 29 per cent <Table 5.23),
the study area, percentage of labourers
repaying
In
the loan regularly ranged from 30 to 40.
Interestingly, those who were repaying the loan
regularly were all members of MPCS, supplying mIlk to
the society.
whol e
block
The agricultural labourers who repaId the
amount (8 out of 35 SCs, 4 out of 8 others In
I and 4 out of 23 SCs and 2 out of 10 others In
block II) in both the blocks did so WIthin two Or three
lactation periods. However, the rest of the labourers
repaid cnly a part of the loan amount even after three
lactation periods mainly due to low mIlk YIeld from
animals.
The major reasons, for the poor repayment
performance and default on the part of the sample
agricultural labourers are presented below:
i ) Most of the selected labourers was prOVIded
WIth low qualIty (low milk yield) mIlch animals
leading to lower rate of return on the
investment made.
215
iii Dairying activity was novel to the majority of
the selected labourers (91 out of 97). As such
they were not well versed with the knowledge
and maintenance of milch animals.
iii) Al though a large number of selected labourers
i v)
were members to MPCS and supplied milk to it 1
this in itself did not ensure adequate income.
The
of
price of milk fixed as it is on the basIs
fat content, which In turn is directly
influenced by the amount of concentrates fed to
the animal along with adequate dry and green
fodder, the high cost of concentrates acted as
a constraint in using such items on a
sc ale.
required
Long inter-calving period (gap between two
lactations) in many cases makes the scheme
uneconomical. Due to lack of knowledge and poor
access to the veterinary services on the part
of the labourers, the timely artificial
insemination, which is crucial for the mi lch
animals, was not planned.
v) Lack of proper cattle shed.
vi) Follow-up services and supervision on the part
of both bank and block officIals were found
wanting leading to carelessness and default on
the part of the selected labourers.
216
Notes and References
1. To get a soclal dimenslon the selected beneficiaries were dlvided lnto two groups Scheduled castes and non-Scheduled Castes. However, this distInctIon was possible only among the selected agricultural labourers, as among the selected small and marglnal farmers no one belonged to Scheduled Caste. Moreover, this distribution was useful In apprecIatlng the differential in sUbSldy amount as It varied wIth the caste of agrIcultural labourers, as explained e15ewhere In thls Chapter.
2. Milch animals are purchased wIthout properly testing the mllk yield and handed over to the beneficiary. The traders follow certAin methods to show that the anImals glve a higher milk yield. One method lS feedlng the animal heavily on the preVIOUS day and another method is not mIlkIng the an1mal for more than 16 hours before the day It IS brought to the market. Generally the traders form a group and in collusion very eaSIly lncrease the prlce, to take advantage of the increased demand situatlon caused by bulk purchases by the purchase commIttee.
217
CHAPTER - VI
RETURNS TO INVESTMENT IN MINOR IRRIGATION SCHEMES
Analysls in this chapter has been done under
two sections to facilitate the understanding of the
Issues in a proper perspective. The first section
describes same of the characterlstlcs of the mlnor
IrrIgatIon beneficiarles, thelr 1dentification and
utIlIsatIon of the loans. And In the second sectlon the
Impact of the mInor irrlgation schemes on the economy of
the small and marginal farmers 1S analysed.
SECTION - I
Characteristics of the Minor Irrigation Beneficiaries
The effectlve utilisatlon of mInor Irrlgation
loans and the subsequent successful operatIon of the
agricultural activltles by the small and margInal
farmers depends, to a large extent, on the prOVlSlon of
follow-up services by the developmental agencle9 and
departments (credit institutions, cooperat,ve SOcletles
218
and agricultural departments) and the access of the
beneflciaries to those serVlces. The purpose of
flnanclng agricultural development through instltutlons
IS not Just putting out money or to replace lndlvidual
money lenders with institutlonallsed money lenders, but
to enable agrlculture and the farmer to move on to a
level of technology that would create a sustained basls
for increase In agrlcultural output, to lncrease the
number of mandays of employment and to have much better
lndicators of development in terms of productIvity of
land, labour and capital itself. This entails a blg
responsIbIlity on the credlt lnstitutlons to e~tend
their functlon beyond credit purveyance and look into
the arrangements avallable for input supplles, that too
in the interest of theIr credit being used properly.
Similarly, the farmers should have the access to the
Agriculture Service CooperatIve Societies (ASeS), and
E~tension SerVIce ~raining and VISIt system T&V). An
understanding of the problems and perceptIons of the
sma 11 borrowers on the above saId pOInts WIll help in
arriving at more objective and effective credit schemes.
An attempt is, therefore, made in this sectIon to
e~amlne the baslc socio-economic characteristIcs of the
sample benefiCIaries, their identificatIon for loans,
and the pattern of loan utilisation.
219
The classification ot the selecte~ farmers on
the basis of their landholding size and the purpose for
which they have beeen provided wlth loans, is given in
Table 6.1.
Table: 6.1
Classificatlon of the Selected Farmers Oy Slze of Landholding and purpose of loans
Block and category of Farmers
Block 1
1 • Marglnal Farmers
2. Small Farmers
Block II
1 • Marglnal Farmers
2. Small Farmers
Total
Purpose of Loan
New Well
2
5
7
Deepenlng 011 Englne of Well
9 3
14 7
8 4
14 8
45 22
TOTAL
14
26
12
22
74
In Black II under new well scheme no farmer
got benefitted during the period 1978 to 1982. The
scheme: deepening of well, has received greater
attention followed by the provision of oil engines WhlCh
220
help the small and marginal farmers to bailout the
water from canals and or wells.
The three non-economic parameters that may be
of considerable importance for analysing the impact of
irrigation loans are educational level of ~he
small borrowers, their membership in organlsations like
and Agricultural SerVIce Cooperative SocIeties (ASCS)
their participation in agricultural eKtension programme~
like Training and Visit Programme (T&V). The rationale
behind the selection of the first variable (Education)
is that the educational level may help the farmers to
understand the procedures and get confidence to approach
the banks for loans, cooperative SOCIetIes for both
input requirements and marketIng the output (like sugar
cooperatives). Membership in organisations llke ASCS
lends a special advantage to the farmers to practice
improved technology and also to be lnnovative. It gives
them access to get inputs like HYV seeds, and seedlings,
fertilizer, and pesticides, at fair price and al~o 1n
adequate quantity. And the equipments like Tractor,
power sprayer, and thresher, are available for hirIng
through these societies. This helps the farmers to
speed up their preparatory work and other agricultural
operations. Keeping this in mind, the information was
collected from the selected small and marginal farmers
221
regarding their membership in ASCS. The knowledge and
awareness about the agricultural ewtension programmes,
it is assumed, may prepare them to undertake improved
agricultural practices.
Literacy Level
Out of the 26 marginal farmers selected from
both the Blocks, 12 are literates (46.5 X) and out of 48
small farmers 26 are literates (54 X). Among the 38
literate small and marginal farmers 29 studied upto
primary level and only nine farmers studied upto high
school level.
Membership in Agricultural Service Cooperative SOCiety
As shown in Table 6.2, in Block I 17 out of 26
selected small farmers (65.4 X) and 5 out of 14 marg1nal
farmers (35.7 X) are members in ASeS. HO"Jever, 1n block
I I it 1S too low: Only one out of 12 marglnal farmers
(8.3 X) and 5 out of 22 small farmers (22.7 X) ar"
m"mbers in ASeS.
222
Table 6.2
Membership of Selected Farmers to ASCS
Block and Category of Farmers
Total No of Farmers Selected
No of Farmers holding ASCS membership
Percentage
-------~------------------------------------------------Block L
a. Marginal farmers 14 5 35.7
b. Small farmers 26 17 65.4
Block II
a. MargInal farmers 12 1 8.3
b. Small farmers 22 5 22.7
Total 74 28 37.8
Knowledge about Training and Visit System
Questions were asked to ascertaIn the sample
beneficiaries' knowledge and level of understandIng
about the T&V system. It can be seen from Table 6.3
that two marginal farmers each In Block I and Block 11,
five small farmers in Block II are ignorant about the
programme. Another group of farmers (8 marginal farmers
and 5 small farmers in Block I and 6 farmers each In the
categories of small and marinal farmers in Block II) are
those who are aware of the programme but have not
benefitted from it. Though they have heard somethIng
223
about T&V Programme the purpose and objectives of It are
still vague to them.
Benefits under T&V Programme
The sample farmers who have recelved some
benefits under T&V programme are classified Into two
groups: (i) benefitted and (ii) effectively benef,tted.
Table 6.3
Knowledge and Benefits Received under T&V Programme by the Selected Farmers
---------------------------------------------------------Category No. of of farmers farmers
Knowledge and the Benef,ts ReceIved under T and V
Do not know
Known but not Benefltted
Benefitted
Effectively BenefItted
---------------------------------------------------------Block I
1 . Marginal 14 farmers
2. Small 26 farmers
Block II
1 . Marginal 12 farmers
2. Small 22 farmers
TOTAL 74
2 ( 14.4)
2 (16.7)
5 (22.7)
9 (12.2)
B (57.1)
5 ( 19.2)
6 (50.0)
6 (27.3)
25 (33.8)
3 (21.4)
17 (65.4)
4 (33.3)
9 (40.9)
33 (44.6)
1 (7. 1 )
4 {j5.4)
2 (9. 1 )
7 (9. 1 )
Note: Figures in parentheses are percentages to the total number of farmers in each category and In thE last row It is to the total number of farmers selected in both the blocks put together.
224
Those farm~rs who are frequently contacting the Village
Extension Worker (VEW) or the Assistant Agrlcultural
Officer (AAO), adopting HYVs and modern technology at
the instance of VEW's advice are all comlng under the
category of 'benefitted farmers'. And those who have
received HYV seeds and seedlings, and undergone farmers'
training programmes, are all coming under the category
of 'effectively benefitted'. Accordingly, only one
marginal farmer and 4 small farmers in block I and only
2 small farmers in block II are coming under the
'effectively benefitted' category. In all (both blocks
put together) more than 12 per cent of the selected
farmers did not know anything about T&V system, 27 per
cent knew about it but was not benefltted, 44 per cent
benefitted and only 9 per cent was effectively
benefitted.
Opinion of Small and Mar9inal Farmers on the Working of T&V System
The poor response of the T&V system to the
needs of the small and marginal farmers prompted to
probe this matter further. Leaving aside those who were
totally ignorant about the T&V programme in both the
blocks, the rest were asked about their opinion on the
working of T&V programme in their villages. The answers
are given in a tabular form (Table 6.4).
225
Table 6.4
Opinions of the Selected Small and Marginal Farmers on T&V System
OPINION
1 Useful and working satisfactorily
BLOCK I BLOCK II
Marginal Small Farmers Farmers
2 6 (16.7> (23.0)
MargInal Small Farmers Farmers
1 2 (10.0) (11.8)
2 Serves only 6 8 7 12 bIg farmers (66.7) (30.7) (70.0) (70.6)
3 More a publicity 9 5 5 6 than practisIng it (75.00) 19.2) (50.0) (35.3)
4 The visits of VEW are not frequent 8 12 4 9 and th" visit of (66.7) (46. 1 ) (40.0) (52.9) AAO 1S rare
Note: Figures in parentheses are percentages to the total number of farmers (except those who are totally ignorant about T&V) ln each category.
It is clear from Table 6.4 that only 16.7 par
cent of the small farmers and 23 per cent of marglnal
farmers in Block I and 10 per cent of the small farmers
and 11.8 per cent of the marginal farmers in Block I I
are havlng a good opinion about the T&V and also they
found it a useful programme for them. Majority of the
selected small and marginal farmers were of the opinIon
tha t th is extension system served only big farmers.
Other serious complaints are about the publicity gIven
to the programme without practicing it and the poor
226
attention paid to the problems of sm~ll
farmers by the extension workers and offic1als.
Sources of Information to the Selected Farmers
The selected farmers were asked about their
sources of information about the minor irrigation
schemes. They received the information from varied
sources as shown in Table 6.5.
Table 6.5
Sources of Information to the Selected Farmers
Block and Category of Farmers
No of Sources of Informat10n Selec- ------------------------------------ted Village Ex-Farmers tension
Workers/VLW
Bank/ASeS! LDB Dff1-cials
B19 Farmers/ Poll beal Leaders
--------------------------------------------------------
Block L
a. Marginal Farmers
b. Small Farmers
Block li
a. Marginal Farmers
b. Small Farmers
14
26
12
22 --------------------
13 4 2
13 15 1
9 5 2
11 12 3 -----------------------------------
227
both the
schemes
village
Majority of the small and marginal farmers, in
blocks, have received information about
from the village level functionaries
the
11 ke
level worker, and village extension worker and
from the officials of financial institutions. A few of
them came to know through the blg farmers and vlliage
leaders.
Beneficiary Identification
The first step in sanctioning the
small borrowers by the financial institutions
identification
necessitated
of eligible
because the
beneficiaries.
loan involves a
loans to
is the
This is
subSldy
component which is meant only for the small and marglnal
farmers. The special agency at the dlstrlct level
(DRDA) with the coordination of block and bank officials
has to undertake this job of identifYlng eligible
beneficiaries. In this connectlon NASARD has glven
instructions (and the LDS's are also having norms)
regarding the distance between two wells, size of the
well, unit cost, HP of the oil engine and Electrlc Motor
Pumpset. The banks are supposed to workout the
financial feasibility of the schemes and in the case of
new well they have to give a feasibility certiflcBte to
get electricity connection. The data collected
228
regarding this aspect has been analysed h~re to know
whether the survey had been conducted to worxout the
feasibility of the project by the banks.
The analysis shows that in the case of seven
new well
undertook
schemes in block I , the bank officials
the project formulation exercise before
sanctioning the loans. For the rest of the schemes, as
per the records, the financial outlays were prepared by
the concerned offlcials of the blocks/or the banks. The
selected farmers however were not consulted whlle
deciding the financial outlays for these schemes.
It was evident from the field investlgation
that there was not much of an effort on the part of the
officals to impress upon the farmers about the prospects
underlying the minor irrigation schemes. Instead, there
was a misplaced emphasls on the subsidy aspect
scheme/s with an intention to lure the farmers
of
to
the
the
scheme/s, so that official targets could be fulfliled.
Besides, while sanctioning the schemes, such farmers who
were recommended by the large farmers
political leaders/or who bribed the
and/or
focal
functionaries were favoured at the cost of
genuinely deserving poor farmers for the scheme.
229
local
level
other
Time Taken to Sanction the Loans
As far as the time taken to sanction the loans
to the selected small farmers is concerned the loans are
sanctioned quickly and not much delay has been found.
Majority of the selected farmers (55 out of
74) received the loans within two months since the
application was submitted. Sixteen farmers received the
loans within a month and in the case of remaining three
farmers
loans.
it took more than two months to receive the
The beneficiaries received loans without much
delay owing to the fact that the financial
were under pressure to reach the targets.
institutions
Problems Faced ~ the Selected Farmers in Obtaining
Loans:
The selected farmers were asked about the
they faced in getting the loans. All the 14 problems
marginal farmers and 16 out of 26 small farmers in
block I and all the 12 marginal farmers and 15 aut of 22
small
able
farmers in black II explained that they were nat
to understand the procedural intrlcacies tnvolved
in getting the loan sanctioned from the Bank.
230
Selected Farmers Access ~ Credit
Facilities
The utilisation of loans and 1tS
borrowers' economic status depends
Marketioq
1mpact on
largely on small
their access to inputs like credit and mater1al 1tems
and to marketing of their produce. As far as credit
faci I ities
departments
from ASeS and services from
are concerned, their access
extension
to them 15
limited as explained earlier. But it was found that
the access to commercial banks' crop loan facilities
also are too limited to the selected small and marg1nal
farmers. That is, only 4 out of the 40 farmers
selected in block I received crop loans during the study
period. However, those small and marginal farmers who
cultivated sugarcane got loans from the sugar m111 by
entering into a contract with it. Accordingly, the
sugarcane 1S harvested by the mill and the loan amount
is deducted when the amount is paid to the farmer for
his sugarcane.
marketing.
That 1S, the credit 1S 11nked w1th
For marketing of other produces
groundnut, coconuts, jowar and ma1ze, the
like paddy,
small and
marg1nal farmers depended on the traders at the v11lage
level, more so because there was no regulated market In
this block. The vegetables produced were marketed In the
231
nearby town, Udumalpet through the Commission Agents who
collected 10 per cent of the sal e proceeds as
commission.
The selected small and marginal farmers
Block II expressed that they were deprived of crop loans
from the commercial bank (State Bank of India) situated
in the block headquarters. In this block too, no
regulated market lS functioning. The
cotton, red chillies, groundnut, jowar,
maize are marketed through traders.
produces
tob acco
However,
llke
and
the
vegetables and flowers are taken to the nearby markets
at Tlruppur and Palladam by the small and marglnal
farmers themselves durlng the early hours of the day.
Here also, the commlSSlon agents collect 10 per cent on
the sale proceeds as their commission.
Utilization of loans
The credit is of course important, but of more
importance is its proper utilisation. Especially, the
subsidised loans meant for small borrowers should reach
them, However, during the survey it was ascertalned that
in two cases big farmers received the above sald
subsidised loans in the guise of small farmers. (Among
these two farmers one farmer owned a ric e mlll and
another a cement pipes manufacturing unit). Both of
232
U1cm got loans to acqulre 011 eng1nes. For the purp0E;e
of our J,nalYS1S, hO(lJever, these tliJO cases not
lnc\udC'd. All ott'l~r caSES \'Jere found as genulne.
233
SECTION II
lmpijct Ri Mingr Irrigatign Loans on Farm Operations
In the earlier section the identificatlon of
small and marginal farmers for bank loans, their access
to credit facilitles and thelr social (non-economIC)
characteristics ln terms of their llteracy level,
membershlp in cooperatlves, the knowledge about T & V
system and the benefl ts they receIved from tlHt
though programme were analysed. And it was found that
the small and marglnal farmers were provided wlth mlnor
irrigation loans, their access to some other credlt
facllities such as crop loans were limlted and also they
were deprived of extension services. The maln aim of
the minor irrigation loans is to help farmers to
increase their income levels either through increaslng
the net sown area or through increasing the cropplng
intensity or by both. It may also facilltate a switch
over to a better cropping pattern when the lrrlgatlon
lS assured. The purpose of the present section is to
examine the net additional benefits derlved by farmers
by undertaking minor irrigation schemes Vla changes ln
land utilisation pattern, cropping intensity, cropping
pattern and cultural practices.
234
A word about the limitations of our analysis
is necessary at this juncture. It was observed that a
few farmers of our sample had taken loans both from
banks and non-institutional sources, at various p01nts
of time and accounting for all these loans, which
borrowed for different purposes, and separating
they
their
impact was not possible. But this may not restrain
comparison in toto, as the obJective is to capture
trend and not absolute gains.
the
the
For measurement of the benefits, as has been
mentioned earlier, all farmers were requested to furn1sh
information on their farm practices, relating to two
points of time: pre-loan period and post-loan period.
Hereafter these are referred to as 'before' the loan and
'after' the loan period, respectively.
I t was gathered during the survey tha t 1n
block I the cost of digging a new well, on an average,
worked out to Rs12.000; motor pumpset and other costs
like payment to electricity board, fitt1ng charges etc.,
came to around Rs 5000. It IS obvious, therefore, th at
the loan amount sanctioned was just enough to d·g a well
and the remaining amount was to be borne by the
benefiCiary <T ab I e 6.6). However, in the case of other
235
1
Table 6.6
Amount of Loan and Subsidy Received by the Selected Borrowers in Block I
Scheme/Activity Average Amount (Rs)
Credit Subsidy Total
New Well
a) Marginal farmers 9985 3212 13197
b) Small farmers 10080 2872 12952
2 Deepening of Well
a) Marginal farmers 5755 2150 7905
b) Small farmers 5800 1600 7400
3 Oil Engine
a) Marginal farmers 5000 1250 6250
b) Sma 11 farmers 5000 1250 6250
schemes (deepening of well, oil engine) the amount of
loan sanctioned was found adequate to cover the total
cost.
In block II, the selected farmers received
loans for deepening of wells and to purchase all
engines, and Table 6.7 gives the details.
The cost of deepening a well is relatively
less in block II compared to block I because of the
differences In the wages paid to the labourers who are
engaged in digging wells and construction works. For
236
Table 6.7
Amount of loan and subsidy Received by the Selected Farmers 1n Slock II
Average Amount ( Rs ) Scheme
Credit SUbS1dy Total
1 Deepening of Well:
A) Marg1nal Farmers 4657 1312 5969
b) Small Farmers 4760 1200 5960
a) Marginal Farmers 5000 1250 6250
b) Small Farmers 5000 1250 6250
example, a male labourer in block I gets, on an average,
Rs. 16 per day compared to his counterpart 1n block I I
who receives Rs. 12 per day for such works.
Benefits under Minor Irrigation Schemes
Wh i I e the benefits of 1rrigat1on are w1dely
recognised, their very nature, stemm1ng from
simultaneous changes technology, input use~ and
resource allocation by the farmers makes very
difficult to quantify and attribute them to a single
factor such as irrigation. However, it 1S hypothes1sed
237
that the
farmers,
i )
i i )
iii )
v)
severally
farmers.
reliable and timely water supply en ab I e
to bring new land under cultivation;
to increase cropping intensitYI
to shift to HYVs (which are more responsive to good moisture conditions);
to shift to crops which have higher (commercial crops);
to use higher particularly Ylelds.
levels of complementary fertillzers, which
value
inputs, enhance
The above mentioned changes elther slngly or
help lncrease the yield and returns of the
Irrigation thus provides small farmers a way
to increase the productlvity of thelr 11ml ted 1 and
slgnlficantly leadlng to increase In their lncome and
employment levels.
At the outset, it may be p01nted out that the
two aspects namely, productlvity and comparatlve
efflclency of dlfferent i rr i gat i on systems are not
analysed here. Worklng out the difference in
productivity between rainfed land and irrlgated land Dr
before the loan and after the loan have not been
attempted here, since there are changes cropp 1 ;,g
pattern and also input usage includlng labour the
study areas. Moreover, except seven new I'''' I I
238
beneficiaries who did dry-land farming earlier, the
other sample farmers neither did exclusively dry land
farming nor lrrlgated farming before the loan. And thlS
rendered it difficult to get the 'controlled farmers'
for comparison; therefore, the 'before' and 'after' the
loan approach was adopted to workout the differences.
As there are a number of factors besides
lrrigation, which can bring about yield variation,
measuring the Impact of irrigation is a difficult task.
Theoretically, the net effect of irrigation on Yleld
should be studied by comparing the yield differences
between irrigated and unirrigated lands, on ly aft e r
eliminatlng the other sources of variation in Yleld,
both on account of technlcal and non-technical factors.
However, the yield differences due to some technlcal
factors can not be isolated as their role IS, more often
than not, complementary to irrigation. Moreover,
the field conditlon is not possible to
observations which would enable one to test
under
get
the
hypothesls under the ceteris paribus clause, even
the observations are chosen from a fairly homogenous
group. Thus, an accurate measurement of the
contribution of irrigation to Yleld 15 possible only
under a controlled experiment. Since it 1S not poss1ble
to do th1s experiment in the present study for reasons
stated earlier, a different approach to measure the
239
economic impact of minor irrigation schemes on the
selected farmers was followed. Accordingly, the changes
in the following variables have been analysed in order:
in land utilisation, cropping intenSity, changes
cropping pattern and the cultural practices like lnput
use, and adoption of HYVs. And then, the lmpact such
changes made on the farmers income and employment levels
was analysed by comparing their position between the two
periods namely, before and after the loan. The rate of
return on investment made in each scheme was also worked
out to measure the financial viability of the loans.
Land Utilisation
One of the ways in which irrigation
contributes to growth in agricultural production is by
e~panding the area under cultivation. It helps to bring
additional lands <which are otherwise fallow/barren)
under cultivation and also it makes cultivation pOSSible
in dry seasons <when lands remain fallow for lack of
water) and thereby helps raise more than one crop from
the same piece of land. An insight into these aspects
may be obtained by analysing the additional area brought
under cultivation after the implementation of the
schemes by the selected farmers. Relevant details to
this analysiS are given in Table 6.B.
240
Table 6.B
Land Utilisation by the Selected Farmers -Before and After the Loan
--------------------------------------------------------Blocks and Category of Farmers
Before
Irrigated land (in acres)
After Percentage Change
Unirrigated land <in acres)
--------------------Before After Percen
tage Change
--------------------------------------------------------
Block L
1 Marginal Farmers
2 Small Farmers
Block II
1 Marginal Farmers
2 Small Farmers
12.75 (0.92)
45.9 (1.76)
13.4 (1.12)
46.95 (2.13)
24.45 (1.74)
88.8 (3.42)
19.9 ( 1 .66 )
67.45 (3.06)
92
93
48
44
15.55 (1.12)
75.60 (2.91 )
9.20 (0.77)
45.45 (2.06)
2.85 -82 (0.20 )
32.70 -57 ( 1 .26)
2.30 -75 <0.19)
24.95 -45 (1.13)
-------------------------------------------------------Figures in parentheses are average landholding size.
Firstly, through the field investigatlon, the
changes in the size of landholding, if any, due to the
sale and purchase of lands (durlng the reference period)
by the selected farmers were noted to be insigniflcant.
In Block I only two small farmers and one marginal
farmer sold their lands (involving in all 1.90 acres)
and one small farmer purchased land (0.80 acres). In
block II one marginal farmer sold 1.50 acres of hiS land
while another farmer purchased 0.46 acres. And the
241
tenancy ie, leasing out and leasing 1n of lands for
cultivation by the selected farmers was also found to
be insignificant in the study area.
It can be seen from table 6.8 that 1n block I
both the small and marginal farmers have 1ncreased the1r
area under irrigation after the schemes to the extent of
93 percent and 92 percent respectively. In block I I the
increase in area under irrigation in the case of Sma 11
farmers is 44 percent and in the case of marg1nal
farmers it is 48 per cent. However, if the average area
under irrigation is taken into account then the marginal
farmers in both the blocks are having more or less the
same amount of irrigated area. The average
are a of the small farmers in blocks I 1S 11ttle h1gher
(3.06 (3.42 acres) than their counterparts 1n block II
acres) .. The average unirrigated area operated by both
the category of farmers across the blocks 1S almost
same ,. To get some more ins1ghts the scheme-WiSE'
1ncrease in irrigated area is analysed.
Table 6.9 gives the details about the scheme-
Wlse increase in the irrigated area of the selected
farmers. The new well scheme has totally brought 6.09
acres of dryland under irrigation for the marglnal
farmers (thereby elevated them to the status of sma 1 I
farmers) and 17.17 acres in the case of small farmers 1n
242
Table 6.9
Chonges in the Extent of Irrigated Lond by B,neficiaries According to Nature of Assistance Receiyed
------------------------------------------------------------------------------_.--------B L 0 C K - I BLOCK-II
SCf£HES HAR6lNAL FMHERS SHAll FARIIERS HARGlNAl FARMERS SMALL FAR!OS --------------------- ----------------- ------------------- -------------Before After X age Before After X age Before After X 'g' Be fore Aller X age
inc- inc- 1nc- inc-rease rease Na~1! ruse
----------- -----------------------------------------
Ne. 0 6.09 2.40 19.51 115 Well (3.04) 1O.4B) (3.911
2. Deepen- B.22 12.12 55 24.l2 39.40 03 B.9b 12.BB 44 31.15 44.10 42 Ing of 10.911 (1.41 ) (1.72) (2.Bl ) (1.12) (I.oll (2.23) (3.15) we II
3. Oi 1 4.53 5.64 25 19.3B 29.B3 54 4.44 7.02 5B 15.BO 23.35 4B Engine ( 1.511 (1.88) (2.m (4.20) (l.lll (1.15) (1.97) (2.92)
TOTAL 12.75 24.45 45.90 BB.BO 13.4 19.90 46.95 01.45
Note: Figurts in parentheses are average londholding size.
block I. The other two schemes, deepening of well and
oil englne have increased the irrigated area to the
extent of 63 per cent and 54 per cent respectlvely In
the case of small farmers in the same block. But,
however, it varies in the case of marglnal farmers: 25
percent in the case of oil engine scheme and 55 percent
in the case of deepening of well. In block II all
engine scheme helped to bring more area under lrrlgatlon
both for the small farmers (48X) and marginal farmers
243
158%) and the deepening ot well scheme broweht nearly 44
percent ot the additional area under lrrlgat10n 1n the
case of marginal farmers and 42 per cent in the case of
small farmers.
Thanks to the schemes mentioned above, the
average dryland area of the selected farmers declined
owing to the increase In irrigated area. As shown in
Table 6.8 in absolute terms, the dryland area reduced
trom a total of 15.55 acres to 2.85 acres in the case of
marginal farmers and from a total ot 75.60 acreS to
32.70 acres in the case of small tarmers. In block II
in the case of marginal farmers it reduced from a total
small of 9.20 acres to 2.3 acres and in the case of
farmers from a total of 45.45 acres to 24.45 acres. The
changes are more pronounced in the case of margInal
farmers compared to small farmers.
Changes in Cropping Pattern
Wi th the provision of loans to Improve the
irrigation conditions, i.e, enabling the farmers to get
an assured irr1gation faCility, changes in the
pattern can come either through an increase in
intensity or through changes in the allocation
cropping
cropping
of the
area for different crops. The allocation of area under
different crops of a borrower-farmer 1S e~pected to be
244
governed by profit-maKimlsation motive, and hence, more
and more acreages are expected to be allocated for
superior and/or commercial crops. In the followlng, the
changes
between
that have taken place In the cropp'ng pat tern
the two periods are analysed before talong up
the changes in cropping intensity.
It can be seen from tab I e 6. 10 tha t the
increase in the area under sugarcane in block I IS very
high (both proportionally and absolutely) compared to
other crops. This has been made possible because of the
contract the farmers made with the sugar mlll by WhlCh
the farmers received loans to purchase inputs 11ke
fertilizer and also e~tension serVices. While the area
under jowar (HYV) , groundnut and other food crops
decreased slightly, the area under local jowar decreased
from 42.85 acres to 21.5 acres in the case of small
farms and from 10 acres to 1.85 acres in the case of
marginal farms. In the case of other commercial crops
(vegetables, tobacco, banana, sun flower, and ch,ll,es)
the re was a significant increase in area both in
absolute and relative terms. There was an inc~ease in
area under paddy from 10.1 acres to 15.9 acres 1n the
case of marginal farms and from 23.9 acres to 44.92
acres in the case of small farms.
245
Table b.IO
Changes in the cropping p,tt.rn of the Selected Far.,rs
8l0CK-\ BLOCK -II
CR(j'S Muginil Ftroers Soal! Farters H.rgina\ Farcers 5&1l! F.rcers
1. P,ddy
2. low,r IHYVI
3. loo,r Ilonl)
4. Olher
8efore After Xage 8efare change
After Xage change
10.1 15.9 57 (211 (27.51
b.7 1141
b.2 -7 110.71
23.9 44.92 B8 (12.51 122)
Ib.9S 15.05 -II (0) I 7.5)
10.05 1.85 -BI 42.85 21.5 -50 1211 13) (22) 110.7)
2 o Ib.2 - 7 tood crops (4)
2 (3)
17.5 (9) (B)
Before After X ag' change
0.5 2.5 400 10.11 (b)
b.21 7.b5 23 (20) (IB.5)
B.B4 2.3 -74 12B) (5.b)
1.85 4 lib (b) 19.7)
Before Afl,r X ag' chang.
._--------
B.OS II.OS 43 15.B) Ib.7)
Ib.B ( 12)
30.9 (22)
4.5 (3)
21.5 28 112.5)
19.75 -36 (t L5)
10 15.8)
121
-------------------------------------.---------------Sub-tat.l 28.85 25.95 -10 101.2 98.b7 -3
(bO) t4S) (53) (49)
-----------------_.---------
COF~ercial ~
1. Sugorcane 1.7 5.b 229 B.7 21.2 144 (3.5) (9.7) (U) (10.5)
2. Caltoo
3. Groundnul 11.7 (24)
4. Other crops
b 112)
9.b -18 4b.83 33.39 -28 (Ib.b) (24.5) 117)
lb.55 17b 34 48.41 42 (29) liB) (24)
17.4 Ib.45 -5 ISS) (40)
5.75 8.25 43 (t8) (20)
4.9 b.5 33 m.5) m.l)
3.51 10.11 188 (Ill (24.4)
60.25 b2.75 4 (H) (37)
17.35 23.85 37 (12.b) 113.9)
28.15 26.4 -6 120.0) !IS.4)
32.3 (23)
58 79 (34)
----------------------_.---------_.---------------------------------------------Sub-lata I 19.4 31.75 b4 89.b3 103.10 15 14.lb 24.8b 75 77.8 108.25 39
(40) ISS) (47) 1511 (45) (60) (5b) (b3)
Tal.l 4B.25 57.7 20 190.73 201.77 5 31.5b 41.31 31 138.05 171.0 24 (100) (tOO) 1100_ (100) 1100_ (tOO) (100) 11(0)
-----------.------------------.---------------------------------------------------------------------tIDI.: Figures In p.rentheses are percentages to the total area under various crops.
246
Wi th referenc:e to Block I I due
additional area brought under cultivation,
under commercial crops increased significantly.
be pointed out that the area under an
commercial crop namely cotton, (which Involves
cost of cultivation), registered only a
increase. However, a significant increase
to
the
It
the
area
may
important
a high
margInal
has been
noticed
(tobacco
selected
in the cultivation of other commercial crops
chillies, onion and vegetables) by the
farmers. In all, the percentage area under
commercial crops has increased from 45 to 60 on margInal
farms and from 56 to 63 on small farms. At the same
time, the proportion of area under food crops declined
from 55 per cent to 40 per cent on marginal farms and 44
per cent to 37 per cent on small farms. However, the
area under food crops more or less remained the same In
this block. The reason behind the contInuous reliance
on food crops like paddy, jowar, ragi and other millets
by most of the selected farmers in block II are, to meet
their household consumption needs and to have fodder to
feed their cattle.
Cropping Intensity
The cropping intensity on the farms of the
sample farmers for the two periods before and after the
irrIgation scheme have been presented in Table 6.11.
247
Table 6.11
Cropping IntensitIes of the Selected Farmers
-------------------------------------------------------Block/Category of Farmers
Cropping IntensIty Percenta"e change
Block
1. Marginal Farmers 2. Small Farmers
Block L1.
1. Marginal Farmers 2. Small Farmers
Before
170 157
140 149
After
211 167
186 185
24 6
33 24
Cropping intensity reflects the effICIent use
of per unit of land by the farmers. In block I the
cropping intensity was higher on the margInal farms than
on the small farms and also improved faster. By and
large, similar was the situation in Block II.
It is intended to see also the scheme-wIse
changes in the cropping intensity to know the difference
that each of the scheme has meant to croppIng Intensity.
Table 6.12 provides the details.
In Block I the cropping intenSIty increased
significantly in the case of new well scheme and In the
case of other two schemes it increased margInally. In
block II, the two schemes selected have conSlderably
increased the intensity of cropping of both the margInal
and small farms.
248
Tahh 6.12
Ching's in th. Cropping Int.nsity of th. S.l.cled Far •• rs According 10 th. Assistance R,c.iv.d
SCl£MES
1 fie. Well
BlOCK-I B l 0 C K - II
Harginal Faroers SoIall Faroers Harginal Faro"s SoIall Farlers
B,for, Aft.r Xag' Befor, chang'
145 200 38 no
After
160
Xage Before After X a9' change change
23
Before After X age chang.
2 Deep.-n1ng 100 204 13 100 190 5 142 190 34 156 207 TI of wei 1
3 Oi 1 177 217 22 167 190 14 146 184 26 147 171 16 £ngin,
Changes in Cultural Practices
In literature, lack of adequate credit
facilities and extension se~vices have been argued as
the main factors responsIble for the small and margInal
farmers not going in for new technology. Baslcally new
technology means the use of improved or HYV seeds,
chemical fertilizers, insecticides and pesticlues. Even
if the farmers adopt HYV seeds, without the support of a
package prDgramme, the HYV seeds alone may not gIve
expected d,vldends. Keeping this In mind the cultural
practices of the selected farmers in terms Df their
249
adoption of HVVs and also the use of modern in8wts RPF
studied. The proportion of area under HYV crops to the
total area cultivated and the use of modern Inputs
(fertilizer, pesticides and insecticides) have be~n
taken as indicators of the farmers' adoption of the
advanced farm-technology. The value of Inputs
calculated at current prices is given on per hectare
b as IS. Table 6.13 provides an overall view on the
adoption of new agricultural practices by the selected
farmers.
Table 6.13
Adoption of New Agricultural PractIces by the Selected Farmers
Blockl Category
ProportIon of area under HYV Crops to the total
area cultivated (Yo)
Before After Yo
Change
The value of per hectare modern Inputs {In Rs.l
Before After 'I. Change
-------------------------------------------------------------------
Block 1
MargInal Farmers
2 Small Farmers
1. Marginal Farmers
2. Small Farmers
49
51
43
44
-----------------
65 33
77 51
51 19
55 25
---------------------
250
716.59 1151.49 61
1087.24 1705.00 57
469.49 667.17 42
555.79 840.14 51
-----------------------------
The small and marginal farmers in Blo~k I
allocated more lands under HYV crops compared to their
counterparts in block II. The percentage change in the
proportion of area under HYVs between the two periods is
the highest in the case of small farmers (51) in block I
followed by the marginal farmers (33) of the same block.
As mentioned earlier the mere adoption of HYVs will not
yield dividends if it is not matched adequately w1th
other 1nputs. In this count also the small farmers 1n
block I ranked first by using Rs. 1705 worth of inputs
per hectare, followed by marginal farmers (Rs. 1151
worth of inputs per hectare). But their counterparts 1n
block I I are using the inputs far below th,S level.
This seems to support our hypothesls that the spread of
fertil,zer use could be restr1cted because of non
availab111ty of cred1t ie crop loans for these small and
marg1nal farmers.
Impact ~ Gross Output. Cost and Income
The ultimate obJective of all credit schemes
is to help the farmers to move to higher echelons of the
income levels. The other parameter that can adequately
be visualised as an appropriate one is the augmentation
in net 1ncome of the borrower farmers, after ava1ling
the bank loans. In the following paragraphs an analysis
251
is made to know the impact of irriQation lo~nq on ~Oqt
of cultivation, gross output and net income of the
selected farmers.
Cost of Cultivation
The general practice to calculate the cost of
cultivation is to adopt one of the four alternative cost
concepts glven by the Farm Management Studies. The
concepts used at the fIrst stage of cost analysis here
correspond to cost A of the Farm Management Studies.
This cost A includes all the paid-out costs ( i . e •
purchase of the material inputs like manure,
fertilizers, pesticides, insecticides, and seed) plus
value of hired human labour and value of bullock labour
(hired as well as owned) and imputed cost of farm
produced inputs like manure and seeds, if they were
used.
cost
The annual overheads, which constitute another
item, include repairs and maintenance of farm
capital, cost of anImal feed and treatment, electricity
charges, water charges, land revenue, ,nterest pald on
loans, etc.
In the second stage, the lmputed cost of
family labour is included in the above cost. <It may
be noted that imputed rent on own land and depreclatlon
of capital are not included in costs). Thls cost
252
appro~imately corresponds to the cost C concept of farm
management studies. This method is followed with a
view tti comparing the viability of the Schemes under th~
above two situations since the participatlon of family
labour in the production process is normally higher in
the case of small and marginal farmers.
Valuation of Output
in the
The main interest of the present analysis is
farm economy of the household, rather than in
individual crops and their productivity dIfferences
between size of holdings and between blocks. These
dIfferences have been IndIrectly explaIned the
previous section in terms of croppIng
croppIng pattern and use of modern inputs.
IntenSIty,
Here an
effort is made to find out the differences in net income
of the small and marginal farmers due to the dIfferent
minor irrigation schemes.
First the output has been valued in terms of
market prices. Output can also be valued at realIsed
prices because prices differ between dIfferent farmers
within a village and across Villages. ThIS depends not
merely on the quality of the product but also on the
time and place of sale, access to market and the
bargainIng position of the concerned partIes the
253
market. The output is valued at both the pr1ces
separately - realised prices and uniform (market) prices
first at the village level.
Both these sets have analytical significance.
It is the realised prices which determine actually the
income of farmers and not notional prices. As such the
valuation of output at realised prices has been done for
the purpose of computation of income. And the
valuation of output at a uniform price 1S also done to
compare it with that of realised prices WhICh may
indicate the access of the small and marginal farmers to
the market.
The realised prices are defined here, for the
purpose of valuation, as the prices actually rece1ved by
the respective farmers in their sale transactIon. The
valuation of unsold product10n (self consumption and
payments
prices.
in kind) is also done as per the realised
For an alternative valuation we have used the
uniform price, being the average of prIces for the
concerned crop realised. by all farmers 1n the concerned
village. However, since the ratio at the v1llage level
diverged only a little (the range being 98.4 to 85.9 1n
block II and 93.5 to 80.4 in block I) across the
villages, the uniform price at the block level has been
used.
254
Yet another alternative valuation taken 1nto
consideration is the district level prices.
know whether particular block as a whole
This 1S to
suffered a
price disadvantage. The pr1ces of respectIve crops at
the important marketing centres of the district have
been averaged for this purpose.
It has also been tried to see from the
information gathered from farmers if whether the quantum
of product sold gave a relative price advantage
respect of individual crops. However, no consIstent
picture was found in thIS respect and hence thIS aspect
has not been taken into account in the present analysis.
price
crops
Further we have trIed to probe whether the
disadvantage differs between the sale of
and commercial crops. This, it 1S hoped,
food
w 1 11
explaIn the access of the small and marg1nal farmers to
the markets 1n a real Sense since normally their
marketable surplus is lower in the case of foodgrains
compared to the commercial crops. And also, the cost of
cultivation of commercial crops is relatively hIgh to
that of food crops and more often than not the poor
farmers borrowed to raise the commercial crops (cotton,
banana, groundnut and sugarcane In the study area) WhICh
forces them to go for distress sale, i.e. as soon as the
255
harv"st is oV"r th"y will sell the produce at a 101"el'
price to repay the debt.
First, the valuation of produces has b"en done
at the
valuation
level of holdings and Table 6.14 giv"s
at realised prices as a percentage over
th"
the
valuation at block average price for th" two cat"gories
of farmers.
The analysis clearly indicates the existence
of considerable difference between the
valuations. This elaborate e~ercise divlding the gross
output into two groups as commercial crops and food
crops Yielded expected patterns. The difference between
the two sets of valuations is more pronounced in the
case of commercial crops compared to th" food crops. It
clearly explaIns that the marginal farmers are often at
a disadvantage, the ratiO In block I 15 81.4 and
block II it IS 71.4 for commercial crops, and 90.3 and
80.9 respect,vely for food crops. The small farmers are
relatively better placed In block I compared to the
position of their counterparts in block II. The access
to the fair price markets is limited to both
categories of farmers and it is more so in the marketIng
of commercial crops.
256
Table 6.14
Gross Value of Agricultural Output (GVAO) at Reallsed Prices as Per cent Over GVAO Block Average Prlce
Block/Categoryof Farmers/ Crops
Block L
1 • Marginal Farmers:
A. Commercial Crops
B. Food Crops
C. Overall
2. Small Farmers:
A. Commerclal Crops
B. Food Crops
C. Overall
Block !.l
1. Marginal Farmers:
A. Commercial Crops
B. Food Crops
C. Overall
2. Small Farmers:
A. Commercial Crops
B. Food Crops
C. Overall
---------------------------
GVAO at realised prices as percent over GVAD at Block Average prlce
81.4
90.3
85.8
90.5
100.0
95.3
71.4
80.9
76.1
80.7
80.6
80.6
----------------------------
257
As mentioned previously, in the second staQe
it is also explored whether any particular block as a
whole suffered a price disadvantage. For this purpose,
another set of valuation of agricultural output
(separately for commercial crops and food crops) using
district average prices of respective crops has been
computed, and the value of agricultural output at block
level prices has been expressed as a percentage over the
value at the distrlct average price for the two blocks.
Thls valuat,on has been done only at the block level and
not at the level of holdlngs. The results are presented
In Table 6.15.
Table 6.15
Block PrIce Levels Relat,ve to District Average, for Farm Produce (ratios in percent)
Blocks CommerCIal Crops Food Crops
1. 81 oc k I 84.4 97.5
2. 810ck II 79.6 86.9
It is interesting to note that the d,fference
between the average price at the block levels to
district level price is significantly hIgh in the case
of commercial crops; block II is more dIsadvantageously
placed than 810ck I in respect of both the crops.
258
This could be due to the situation that prices
realised by a given region are determined by a number of
factors like access the villages have to 1nfrastructural
facil1ties, quality of products sold, the e><tent of
commercialisation, the level of development and
divers1fication of act1vities.
The foregoing discussion was undertaken with a
V1eW to apprec1ating as to what difference the valuat10n
of output at the block level uniform pr1ces would make
to the income status of the sample farmers. Except for
its conceptual significance, the above discussion would
not indicate the . actual' income status of the sample
farmers, Slnce it is realised prices which count really
in the matter. Therefore, the discuss10n that follows 1S
based on "real ised prices ll•
Impact on Gross Output, Cost and Net Income Per Household
It 1S proposed to examine the 1mpact of
irrigation loans on the small and marginal farmers'
gross income, cost and net income by comparlng the sa1d
variables at two pOints of time namely, . before' and
. after' the loan. The blockwise and schemewlse analysls
wi 11 facilitate clear understanding about the
performance and the financial viability of each scheme.
259
-.----
The si2e classwise details regarding cost of
cultivation, its composition (both with and without
imputed cost items) and gross and n~t income are
presented in the appendices A and B. A summary view,
block-wise has been given in Tables 6.16 and 6.17,
respectively.
Table 6.16
Output, Cost and Estimated Per Acr. Net Crop Inco.e of Sample Faroers In Block
-----------------------------------------------------------------------------------------Category of Far •• rsl Scheles
1lAR61NAl FARHERS
1. N •• Well
2. Deepening well
3. Oil Engine
S!\All F ARt1ERS
I. Ne. Well
2. DeepenIng of well
Before the loan
Output Cost OIC %
3553 22IB 160
720b 4118 175
7710 4106 188
7746 4056 191
12718 7961 160
3. Oil Engine 13291 8307 160
After the loan Net Inco.e per Acre
Output Cost ole ~
10788 6509 166
10846 6319 172
13200 7321 180
19065 8939 213
18636 9842 189
23103 12835 180
Before After ~ ago loan loan Increase
485 1556 221
1107 1623 47
1313 2303 63
770 2114 175
9a'I 182B B5
970 1998 106
-----------------------------------------------------------------------------------------
260
In Block I, the percentage increase in
lnCome is higher in the case of new well scheme;
net
both
the small and marginal farmers have realised increase 1n
their income levels. However, in absolute terms, the
net income per acr~ of marginal farmers who undertook
new we 11 scheme is the lowest (Rs. 1556) compared to
other schemes. The net .ncome of sma 11 farmers has
1ncreased substantially in the case of new well and all
englne schemes and marginally in the case of deepening
of well. On the whole, the schemes have resulted In an
lmprovement 1n the income level of the sample farmers.
Another striking feature is that the output-cost rat10
has substantially been increased after the loan 1n the
case of small farmers. In the case of marg1nal tarmers,
wi th respect to two schemes (deepen1ng of well and all
engine)the output-cost ratio has decreased sllghtly and
1n the case of new well scheme it has reg1stered a
marginal increase.
In block I I the net income per ac f' e
absolute terms is low compared to block I, the lowest
being Rs. 1113 in the c: ase of sma 1 1 farmers who
undertook
lncrease
and the
oil engine scheme. However, the pe,'centage
In net income per acre of them is higher (lOB)
output-cost ratio also 1ncreased marg1nall;.
As far as the marginal farmers are concerned, the 01 1
englne scheme has benefited them most: the output-COSt
261
Tab .. 6.17
Output, Cost and Esti.ated per Acre Net Crop Income of Sa.ple Far •• rs In Block II
------------------------------------------------------------------------------------Cat.gory of Far ... sl Sch .. ..
Before the loan
Output Cost ole x
~fter the loan
Output Cost OIC %
Net Inca •• p.r Acr.
B.for. After X ag' Loan loan inc:r!ase
------------------------------------------------------------------------------------
HMGINAL FAAMERS
1. Oe.p.nlng of •• 11 4466 2441 183 7615 4008 190 713 1270 78
2. Oil Engine 4033 2686 150 927b 4407 210 481 1739 261
SMll FARIIERS
1. Deep.ning of we 11 5967 3184 187 12951 6670 194 577 1303 126
2. Oil Engin. 6030 3422 176 12150 6717 181 534 11 !3 108
ratio increased from 150 to 210 between the two per10ds
and their net income increased to the tune of 261
percent. Interestingly, the per acre net Income 1S
higher 1n the case of marginal farmers over the small
farmers in the case of oil engine scheme.
262
Table 6.18
Loan Repayment Performance of the Selacted Farmers - Blockwlse, Schemewise and Categorywlse
BLOCK-I BLOCK-I I
PARTICULARS New Well Deepening Oi I Engine Deepening Oi I of well of well Engine
----------- ---------- ----------- ----------- ----------M F S F M F S F M F S F M F S F M F S F
No. of farmers 2 5 9 14 3 7 B 14 4 B
No. of farmers:
a) Completely repaid the loan 3 4 7 2 7 3 B 2
b) Aegul ady repaYing the Instal -ments 4 6 4 5 4 6
c) Defaulted 1 2 1 1
Note: MF = Marginal Farmers; SF = Small Farmers
A look into the schemewise performance shows
that 9 out of 10 farmers in block I and 2 out of 12 In
block II who borrowed to Install oil engines, prompt 1 y
repaid the loans, and the remainlng farmers ldE re
repaying the loan instalments regularly. In the case of
deepening of well scheme 11 out of 23 in block I and 11
out of 22 in block II repaid the loan completely. One
264
farmer each in both the categories and In both the
blocks were found to be defaulters. The remaIning
farmers who borrowed under this scheme, were found
regular in the repayment of loan instalments.
One marginal farmer and two small farmers who
obtaIned loans for digging a new well in block ! weT'e
found to be defaulters. The remaining four farmers
repaid the loans fully. Those who defaulted stated that
as they had spent more than the loan amoun t , by
borrowing from private sources to install electric motor
pumpset (or oi 1 engine) and to get the electrIcIty
connection, they were not able to repay the loans
promptly. They gave priority to the repayment of loans
borrowed from private sources.
"Inadequate income" was the reason attributed
by two farmers who defaulted in the case of deepenIng of
well scheme In block II. However, their counterparts in
block r defaulted wilfully, thinking that the Sta te
Government would write off their loans as it did on
earlier occasions.
The three important factors, among others,
tha t were attributed to the prompt repayment of
and regular repayment of loan instalments by
selected farmers were: the subsidy component of
265
loans
the
the
loan, free/concessional ele~tri~ity ~harQ~s ami th~
by additional income they were ab Ie to f'eceive
undertaking the minor irrigation schemes.
To sum up, the access of the selected small
and marginal farmers to the ASeS, extension services
(T&V system), banking and marketing facilIties was found
to be limited. Nevertheless, the minor Irrigation
schemes undertaken by them with the help of
institutional finance - new well, deepening of well and
oil engine - facilitated an improvement In theIr farmIng
conditions through positIve changes area under
cultivation, ~ropping pattern, cropping intenSIty and
cultural practices which in turn brought about an
Improvement in their farm in~ome which of course, varIed
across blocks, schemes and farmers.
266
CHAPTER VIr
FINANCIAL VIABILITY ANALYSIS
In this chapter, the financ1al v1ab1llty of
the two schemes studied namely, da1ry scheme and minor
irrigation scheme has been analysed and the results are
presented in two sections~ In the first section, the
financial viability of dairy loans 1S analysed by uSIng
four criteria, namely, Pay back perlod, Net Present
Value, Benefit-Cost Ratio and Internal Rate of Return
( I RR ) • And, in the second section, the results at
financial viability analysis of minor IrrigatIon
are discussed.
scemes
SECTION I
Financial Viability Analysis _ Dairy Scheme
It is possible to use the data on costs and
returns of dairying to analyse the investment worth on
dairying. To determine the impact of the scheme on tho
beneficiaries, i t has been conSIdered approprlate to
267
---------=---
determine the private costs and benefits of th~
for the beneficiaries. These information have been used
to determine the financial viability of the dairy loans
from
study
the beneficiaries point of view. As
dealt wi th the poor farmers and
the present
agrlcul tural
labourers and since they hardly hire labour to look
after their animals, the family labour contribution was
measured and analysed.
assumptions used in measuring costs and
benefits
below:
The
and in determining viability are explained
The Milk Yield and the Lactation Available
The quality of the animal is measured in terms
of breed, age, lactation number and the milk Yield.
Majority of the borrowers purchased cattle in the second
lactation and a few in the third lactation. Howeve r, In
those cases wherein the officials purchased the anImals
in the absence of beneficiaries and distrIbuted
the beneficiaries are not very much sure about its
and lactation number. This is a serious limitation
since there was no record as such to verify
them,
age
and
the
informatIon, the details about the ag e, lactation
number, breed and milk yield in such cases have been
268
cross-checked with the bank officials, VLWs, Veterinary
Producers doctors and the Secretaries of Milk
Cooperative Societies (MPCS) • All the milch animals
supplied to the beneficiaries were buffaloes; majority
of them were of local-breed purchased within the
district. Majority of the beneficiaries, especially all
the agr1cultural labourers, d1d not prefer to purchase
cross-bred animals owing to the following reasons.
a.
b.
c.
d.
The price of the cross-bred animal is very h1gh
1.e. the loan amount is not sufficient enough to
purchase one such animal.
Even if 1t is purchased, there is a h1gh rate of
risk associated wi th it. That is, the
maintenance becomes diff,cult Slnce maJOr1ty of
them are not having proper cattle shed and the
fodder supply 1S also not assured.
The cross-bred animals require more medical
attention than the local breeds. For th1S the
serVIce of veterInary centers and dIspensarIes 15
a must. But the veterInary servlce5 are not
evenly distributed to all the areas.
Though the animals are insured against the
at the time of supplying it to the benef1c1aries,
maJOrity of the agricultural labourers, small and
marginal farmers are not aware. The enqu1ry with
269
.-------,~.- -_.
the VLWs and other officials shows t t-.a t
themselves are not familiar with the cattle
insurance and the insurance company officials are
also not canvassing in the rural areas.
All the above factors kep t away the
agrIculture
animals.
labourers from purchasIng of cross-bred
The Buffaloes in the study area are capable of
givlng seven to elght lactations. Therefore, buffaloes
supplled in the study area, an an average, were stlll
1 eft wlth a product,ve period of about SIX more
lactatlons, (with havlng completed two lactatIons at the
t lme
mil k
days
b re ed.
Costs
of purchase by the beneficIaries). The number of
days (Mllk period/lactatIon) varies between 245
and 270 days depending upon the nourishment and
The costs associated wlth maintaining the mllk
cattle
namely;
can be classified into four broad categorles,
i) Out-of-pocket expenses incurred on purchased Items
like concentrates, fodder (both green and dry) ,
and hired labourers;
270
ii) Value of farm grown green, and dry fodder5;
iii) Domestic labour; and
iv) Cost of capital.
The farm grown items have been valued at
market prices/rates. Rearing of animals was undertaken
by the beneficiaries themselves and no hIred labour was
employed for the purpose. In other words, family labour
In particular, is e~tensively used for lookIng after the
animals.
The prevailing market wage rates have been
used to workout the cost of family labour involved
cattle rearing. This has been done contrary to some
earlier studies assuming that the opportunity cost IS
zero In the case of rearing in anImal!
needs to be pointed out that for
However,
the purpose
It
of
vIabilIty
includIng
analysis two sets of computatIons, one
imputed costs2
and another excluding Imputed
costs have been used.
Cost of Capital
The dairy loans given to the benefICIarIes
like sma II and marginal farmers and agricultural
labourers have to be rep a id wi th Inteiest
instalments. a VIew to linking the repayment of
271
loan with the income from milk production th~ P~riod of
loan has been tied at 4-5 years (2-3 lactations).
instruction is given by NABARD to the cooperative
This
banks
and commercial banks, and it also advised the commerCIal
banks to sanction loans only to those who are becoming
members
loans.
of the MPCSs to facilitate the recovery of
by
the
And the secretaries of MPCSs are in turn
the banks to deduct the loan amount from the
beneficlaries earned by the sale of mIlk
asked
lncome
In the
following way:
To be repaId in two lactation as per schedule
with a dry perIod of 4 months together WIth
commencing from:
I to IV months Rs. 120 per month
V to VI I months Rs., 100 per month
VIII to IX months Rs. 80 per month
X month Rs. 60.
interest
ThUS, It comes to Rs. 1000, l.e. pE>r lactatIon
the amount to be repaid is Rs. 1000. After deductIng
Rs.2000 durIng two lactation perlods the
amount, if any, will be deducted durlng the th 1 rd
lac tat lOn. However, ln practicE>, this was not followed.
In fact there was a complaint that ln some
secretaries of the MPCSs, on th E> ad vic e
272
cases
of
the
the
commercial ban k s , I.J.Jere deductIng hIgher amount por
month, recovering the ",ho Ie amount I.J.Jlthln a pi?rlGd of
one year, thus taking away the entIre IncomE from sal~
of milk of the beneficiary or forcing hIm to repay the
loan from his other sources of income or from other
borrowings. Leaving aside the above clted cases for the
convenience of the analysis, the follOWIng 1 D an
repayment pattern has been assumed.
In the present analysls, the lnterest rete has
been taken as the cost of capItal. The loan Instalments
can be taken as a part of the cost of capltal 1 f the
initial investment 1S taken as zero. But ,n the present
analYSis, considering the convenience ln calculatIng
the
for
measures of investment worth, 1nstead of
depreciation on the anImal every year, the
purchase price has been considered as the lnvestment,
and the resale value at the end of the elghth
(scrap value) has been taken as an Income.
lactation
The cost incurred by the beneflClarlE'S
maintaining the buffaloes during dIfferent lactabons
has been calculated using the above assumpt,ons. Since
the loan
marginal
amount
tarmers
varies between the
and the agrIcultural
sma 11 farmers,
labourers, the
viability analysis has been carrled out separately for
these three categories.
273
Benefits
The returns to the beneficiaries can include
the following:
i) Value of milk produced
ii) Cow-dung
iii ) Sale of calf/heifers at the end of each lactation, and
iv) Scrap value of the animal at the end of the productive life period.
The value of milk per lactation has been
calculated using the total milk yield in a lactation
and the market price realised by the beneficiaries.
However, those who are supplying the milk to the milk
societies realised the price according to the level of
fat content of milk. In these cases the statements made
by the beneficiaries regarding milk Yield and the income
they received have been cross-checked from their milk
SOCiety cards and also from milk society records. The
length of lactation period varied from 245 oays to 265
days in block I and 254 days to 270 days in block II.
The value of the cow-dung has been obtained by
taking into consideration its prevailing price (on per
bullock cart load basis) in the study area. The value
of the calf at the termination of the lactation periOd
has been estimated using the actual sales price reallsed
274
by tho beneflclarles dlSposing of the calf.
agrIcultural labourers and most of the
Almost
small
a I I
and
margInal farmers ln both the blocks sold thelr calves at
ttle tcr,nln~tlan of the lactatlon and only a very few of
second them retaIned ttle female calves for getting the
("') I' n (' f' ,1 t 1 on • ConsIderIng the above facts, the sale value
• 1 I~ l t1 P. [' n (1 of l h (' 1 act a t 1 on has bee r1 con S 1 d ere d for all
r: .) 1 '.' I' " Inslcalj 01 I~nrklng out the multIplIer effect
t.'lf' C.l''':'e of a if't.) beneilclar-les vJho retaln calves. The
.-; C r' ,j () ",' .1 1 t J f,' 0 f l I, [> <1 n 1 mal has bee n t a ken as the valUE?
!·P.1:!~-,(·(1 ;'.l th[· end of eIghth lactatIon, and the survey
-: ,\. (I"> ,IC ~_IJ;ll ''':'iI1 C's have neen ut lllsed to determIne
The '.'\ "I) III ty of the loan has been determIned
''Hi tt." !1.1'.'](-':' of prlvatL' costs and returns accruIng to
1 t·, t, t J r· r", I' f 1 c: 1 ;\ r- 1 (: ~-.. 'l n d tIl Co 1 r a b 1 lIt Y tor epa y the loans
.! '. 1. 1f)!I]"tr:c.1 hy tilt' provlsIons of the loan
til (: (1 c1 t it on costs ~nd returns the
agreeml?nt.
Investment
\,.l() r- tIl of tilt' scheme has bC'(ln calculated, USing four
(1 1 f f (. r" f' r1 l c r J l (' r~ 1 a t n am [' 1 y, 1) pay back perIod, 11 net
p r- f' '.-.. r'(1 t. ',/,l}ue, 11 I) Internal rate of return and 1 v )
275
dairy
the
To determine the financial viability of
loans from the benefi~iarIes point of Vlew,
above four measures have been ~al~ulated on
the
all
the
basis of the data ~olle~ted from the sample
beneficiaries. The inter-~alving period-wise cost and
returns are ~onverted into yearly ~osts and returns
data. The inter-calving period included nine months of
lactatIon and six months of dry period. Thus, the
~osts and returns for the entire period were readJusted
so that they are expressed on an annual basis. These
annual costs and returns are used to calculate the
measures of investment worth (Table 7.1).
In cal~ulating the measures two sets of cost
data were assumed: (1) all costs in~luding the out-of-
pocket expendItures, Imputed value of farm grown Items
and family labour and cost of capital (SItuat,on A) and
(2) cost excluding value of imputed items (SituatIon B).
The point is that costs Including the imputed Items may
be an over estimate and, therefore the measures based
on thIS are likely to be under-estimated. At the same
time exclusion of imputed cost assumes zero opportunIty
cost and, this tends to be an under-estimate of cost,
which implies that the measures based on this WIll be an
over-estimate. For this, two sets of measures
including and excluding imputed cost was presented In
Table 7.1. This is to indicate the probable range In
276
whlCh the two measures vary the measure including
imputed costs serving as a lower boundary. The
lnterpretations of these measures are provided here wlth
a view to drawing conclusions on the finanCIal
viability of the scheme to the three category of small
borrowers in the two blocks.
The pay-back period worked out to seven years
for the small farmers ln both the blocks; SIX years
the case of margInal farmers in both the blocksl seven
years for agrIcultural labourers in block 1; and six
years to their counterparts in block II when all cost
items were taken into account. If the Imputed costs are
not lncluded In the analysis the pay-back perIod becomes
much smaller three years in the case of all the three
categorIes of small borrowers In block II and marglnal
farmers In block I . , for the rest of two categories in
block I the period is little higher (four years). The
emerglng point is that, it takes six to seven years to
recover the cost of purchase and maintenance of mIlch
cattle from its returns to the beneficiaries and If the
lmputed costs are excluded it takes 3 to 4 years.
277
Table 7.1
Heasures of Iny.st.ent Worth Per Buffaloe in the S,l.cted Blocks
(N?V at Rsl
Block I Block I I
Measures Situalion A Situation B Situatwn A Situation B
SF HF AL SF MF AL SF MF AL SF HF Al -----------------------------------------------------------------------------------------------
I. P.y back p.riod
2 Net pres,nt value at
7 6 7 4 4 7 6 6 3 3 3
al Discount ral. lOX 2705 3340 1204 8943 9225 4336 2005 2693 2764 bb30 7673 6742
bl Discount rate 12X 2493 3078 1m 8306 85b5 4037 1550 2738 2594 6162 70'16 b34b
cl Discounl rat. 20X 1850 2284 859 0350 6539 3114
3 Inl'rnil rate of return
4 B,nefit cost ratio:
30 40 22 )50 )50 )50 (201 (201 (51
1143 2062 1925 4723 5483 4803
2B 35 30 )50 )50 )50 (101 1151 (251
.1 Discounl rat. lOX 1.22 1.31 1.13 2.49 2.64 1.75 1.18 1.31 1.29 2.51. 2.58 2.46
bl Discount ral, 12X 1.21 1.23 1.13 2.47 2.47 1.76 1.17 1.30 1.32 2.53 2.52 2.50
cl Discounl rale 20X 1.20 1.26 1.13 2.39 2.47 1.72 1.16 1.29 1.30 2.43 2.47 2.40
Not, : SltU.two A ~ Calculated Yalu,s when I"put,d costs includ,d. SituatIon B ~ Caleulat,d valu,s when I"put,d costs "elud.d.
SF: S.all Far.,rs H F : Marginal Farm.rs A l : Agrleulrural labour,rs
Flgur,s In par.nth.s.s ar. lntern.l r.t. of r.turn wh.n the subSIdy amount IS ta'.n .5 loan.
278
The net present value. as pointed out earlier,
is a function of the discount rate. For the purpose ot
the analYSiS, three discount rates (10 %, 12 % and 20 X)
are used. (The interest rate charged on the dairy loans
is 10 per cent, the opportunity cost of capital, usually
taken as 12 per cent in India and to indicate a higher
rate of return 20 per cent has been taken into account).
When the imputed cost ,tems are ,ncluded ,n the
calculat10ns, the present values worked out to Rs.2705,
Rs.2493 and Rs.1850 respectively for three
rates the case of small farmers in block
average investment 1S RS.2057
interest
I .
and
The
th1S
1nvestment has been justified when the d,scount rate 1S
at a llttle aver the 1nterest rate l.e., 12 per cent.
In the case of marginal farmers ln block I
the present values worked out to Rs.3340, Rs.3078 and
Rs.2284 respectively for the three discount rates. The
average initial investment is Rs.2150, and thls
lnvestment has been Justifled even when the dlscount
rate has been taken at 20 per cent. The net present
values in the case of agricultural labourers ln the same
block are very low (Rs.1204,Rs.1119 and Rs.859
respectively for the three discount rates) agalnst the
average initial investment of Rs.2500 and even at the 10
per cent interest rate level also the investment
justified.
279
lS net
In block II the average initial lnv •• tm~nt 01
the small farmers, Rs.2000, has been justified at 10 per
cent level but not at 12 and 20 per cent levels since
the present values worked out are Rs.2005, Rs.1550 and
Rs.1143 respectively for the three discount rates.
However, the average initial investment of Rs.2000 1n
the case of marginal farmers of the same block has
been justified at all the three interest rates since the
present values are Rs.2963, Rs.2738 and Rs.2062
respectively for the three discount rates.
initial investment made by agricultural
The average
labourers 1n
block II is Rs.2000 and this has been justif1ed at flrst
two interest rates - Rs.2764 at 10 per cent and
at 12 per cent - though it is not justified at
Rs.2594
20 per
cent since the present value is Rs.1925 at this rate.
The significant point is that the upper
(when imputed costs were excluded from the calculations)
indicates substantially higher present values in the
case of all the beneficiaries. However, 1n the case of
agrlcul tural labourers in block I the present values
are llttle lower when compared to others.
The internal rate of return also shows a
similar tendency as in the case of net present value.
It is (IRR) 22 in the case of agr1cul tural labourers
and for all others it is more than this value. For all
280
the categories, the JRR .s faIrly reascnabl •.
the imputed costs e><cluded, the IRR for the
categories turns to be more than 50. The pOInt to be
noted here is that in the absence of subs.dy amount tile
IRR was found much lower as shown In Table 7. 1 . That
• s, when the subsidy amount also taken as loan, then the
JRR the case of dairy schemes of sma I I farmers,
margInal farmers and agrIcultural labourers In block
was found as 20, 20 and 5 and In block II It vIas 10, 15
and 25 respectively.
The benefit-cost ratlDs are around 1 .21
the case of small farmers in block I, I.e., for every
rupee worth of cost incurred, the return IS 1 .21
the cost included the imputed values. ThIS rat10
higher at 1.31 in the case of marginal farmers of
the bloCks.
realise a
However, the small farmers In
lower benefit-cost ratIo at 1.18.
block
And
laJhen
IS
both
I I
the
agricultural labourers in block II have hIgher ratIo of
1.32
block
(at 12 % d r) comparing to the.r counterparts
I who have a lower ratio of 1 . 13. Though
investment in the milch cattle can be Just.fled .f
1n
the
the
benefit-cost ratio is more than one, the agr1cuiturai
1 abourers In block I, as seen earller In the case of
net present value, are not having a comfortable beneflt-
cost ratio compared to others. When It is worked out
excluding the imputed costs, the benefIt-cost ratiOS are
281
doubled to
the blocks except the agricultural labourers in block I.
Repaying Capacity
The financial viability of the scheme depends
also on the beneficiaries' ability to repay the loans
without affecting their other activitIes. In
otherwords, the receipts from milk supply should be
sufficient to meet the repayment obligatIons and the
expenses required for maintaining the cattle. Most of
the benefiCIaries sold their milk through mIlk co
operatIve societies, and a portIon of the value of milk
has been deducted by the societies for loan repayment.
Thus, the amount paId by the mIlk societies to the
benefiCIarIes should be sufficient to meet the out-of
pocket expenses on the cattle.
Expected Net Return from Dairy Scheme with ~ Buffalo
The following are the assumptions on the baSIS
of which the repaying capacity has been worked out on
per animal, per lactation and per annum baSIS.
i ) Beneficiaries feed their mIlch animals
adequately with concentrates and fodder-both
green and dry,
282
i i )
iii)
i v )
v)
V I )
The lactation period lasts for 300 days,
The per day mi lk yield is
For the first 120 days - 8 litres per
For the second 90 days 5 litres per
For the th i rd 60 days 3 litres per
For the fourth 30 days 2 litres per
The prIce of per litre milk is Rs.2.25.
The income from the sale of cow-dung,
butter milk is Rs.l00 per annum
The cost Involved per day to maIntaIn
animal is
LactatIon perIod for the first 120 days Rs.6 per
for the second 90 days Rs.5 per
for the th i rd 60 days Rs.2 per
.-~-=
day
day
day
day
and
the
day
day
day
for the fourth 30 days Rs.1.50 per day
Dry period - for 65 days Rs.2 per day
V II)
vii i)
i x )
Other expenses (,ncluding veterInary expenses,
rope and bucket) per annum is Rs.100.
The capital expenditure on cattle shed IS zero
The value of own fodder is not taken Into
account and the opportunity cost of famIly
labour is taken as zero.
283
,,)
or more
paying
There eMists no difference between the
blocks and/or between the three categories 01
borrowers in the feeding practlces,
yield, cost of inputs and price of milk.
The worked out figures are:
Total milk yield 1650 llters
Income from milk Rs.3712.50
Income from other sources Rs. 100.00
Tot ali ncome
Cost of milk production
Other expenses
Total e"pendi ture
Net Income
Loan amount deducted
Surplus income left to the beneficiary
Rs.3812.50
Rs.1465.00
Rs. 100.00
Rs.1565.00
Rs.2247.50
Rs.l000.00
Rs.1247.50
m 11k
Thus,if a beneficiary is left with Rs.1247.50
per annum, after meeting the expenses and
the loan instalment, then the dairy scheme
undertaken by the beneficiary can said to be a Viable
proposition. By assuming that the remaining loan amount
will be deducted in the next lactation, it can be
inferred that two years after the loan the beneficiary's
economic position improves Significantly.
At the same time, if the value for own labour
is imputed at Rs.3 per day then the surplus generated by
284
,.
the scheme becomes insignificant tRs.1247.50 - Rs.I095 =
Rs .152.50).
Now it is intended to compare the above worked
out anticipated income and repaying capacity with the
field level data. For this purpose the data collected
from both the beneficiaries and milk societIes are used.
The unIform pattern of deducting the loan amount from
the benef1ciaries by the m1lk societIes is absent 1n the
study
Into
v11lages. However, the averages have been taken
account to indicate the repaying capacIty of the
benefICIaries. The data are related to one lac tat 10n
perIod and given 1n Table 7.2.
The net addition to lncome due to daIry
enterprise varies from Rs.28b for agrIcultural labourers
In block I to Rs.1200 for marginal farmers of the same
block. The deductions towards loan do not add
financIal stra1ns on the beneficiar1es 1n the sense that
they need not raise addit10nal resources for meetIng the
out-of-pocket expenses incurred on cattle keeplng.
However,
deduct1ng
labour.
terms the
marginal
the net additlon to income is arrived wlthout
the imputed cost for fodder and domest1c
The above figures indicate thet In absolute
small and marginal farmers in block I and
farmers In. block II are reallslng hIgher
income than others.
285
Table 7.2
Average Value of Milk Supplied, loan Repayment and II,t AddItions to Incooe of the SelECteD Dairy loan BenefIcIaries
(In Rs. J
-----------------------------------------------------------------------------------------------Block/Category Average value Average amount M of Ilel addltloo DifferEnce of benefICiaries of .ilk deducted by pocket to InCO:f bet ... n the
supplied to sOCIeties for IMI - 101 e'penses IH-DI-E expected the .ilk loan (EI HI InCOIt and sOCIety per repayoent the actual lactatIon (HI (01 Incoaf
---------------------------------------------------------------------------------------~l
MargInal farmers 3445 1075 2370 1170 1200 47.50
2 Small tarlfrs 3054 1028 2026 lObO 966 29l.50
3 Aqricultural labourers 2021 1000 1021 m 2ab 961.50
~ll
Marginal faroen; 2499 1000 1498 Bl0 559.50
2 Small farurs 2123 1000 1123 700 m 824.50
3 Agrlcul tural labourers 2176 1000 1176 635 541 70b.50
If the expected net addItIon to lnCDme IS
taken Into account (Rs.1247.501, then it IS only the
marginal farmers in block I satisfy thiS norm. And for
all others the difference between the two v.lues has
been found high. This indicates that though the
beneficiaries are left with some surplus, It IS grossly
inadequate to make them economically vIable.
286
SECTION - II
Financial Viability Analysis Minor Irrigation Schemes
In Section II of Chapter VI, the costs and
benefits of each minor irrigation scheme and the net
income accrued to the sample farmers have been analysed.
In thIS section the financial benefit cost analysIs for
each scheme has been attempted in order to asses the
viability of the investment made in that scheme. The
benefit-cost ratio and Internal Rate of Return (IRRl are
computed for all the schemes separately. The method of
calculation
elaborated
of both benefits and costs has been
In Section II of Chapter VI. BenefIt-cost
ratIOS, (il without imputed costs and (il) WIth imputed
costs have been worked out for each scheme. The
Internal Rate of Return has been worked out tor three
situations:
il When only paid-out costs are included In the cost
Item, (situation A).
11) When the imputed costs also are Included WIth the
paid-out costs, (situation 8), and
1 i i ) When the subsidy component is lncluded In the
cost
part
of investment, I.e., subsidy treated as a
of loan to be repaid Wl th Interest
(situatlon C).
2B7
The third situation, it is hoped, will swplain
the importance of subsidy in the m1nor irrigation loans
to the small borrowers.
The details of the worked out results have
been given 1n the Appendices C and D. In wha t follows
is the scheme-wise financial viability analys1s.
1.New Well Scheme
The parameters of the viab1lity analys1s have
been computed subject to the following assumpt10nsl
1) The life of the well 1S 40 years.
ii) The life of the pumpset is 15 years.
11 i ) The pumpset is replaced during the 11fe of the
1 v )
well and the salvage value of I P set is taken
as 10 percent of the original cost.
The development benefit flow has the follow1ng
characteristics:
(a) No benefits accrue in the first year of well
construction since it continues for aver SlX
* months.
* In some cases the work will be over 1n less than six months but they have to wait for electr1c1ty connection; sometimes it takes more than a year to get the connection.
288
' .. _--_.'-
(b) Only 50 percent of the additional benefits is
realised in the second year.
(e) Total benefits start flowing after third year
v)
vi)
onwards.
The desilting of well and other repair work
for well are carried out every fIfth ** year.
The viability analysis assumes water table to
*** be constant over the life of the well.
The BIC ratio happens to be the same nable
7.3) for both the categories indicating a POSitive, If
not very high, returns from the scheme. However, the
IRR is high In the case of marginal farmers compared to
the small farmers. When the imputed cost is included,
the IRR becomes very low, and at the same time SIC ratio
also equals to one Indicating that the cont·rlbution of
own human and animal labour is making the otherWise non-
VI ab 1 e scheme into a Viable scheme. It is Interesting
to note that when the subsidy amount is Included In the
cost
-----
**
***
(situation C), the JRR is reduced In the case of
Based on the observations collected from the sample farmers.
The water table situation 1n Block-I IS
normally stable over the years With rarely the wells becoming dry.
289
•
· ..
Table 7.3
Financial Viability Analysis -New Well Scheme
--------------------------------------------------------Category of farmers
Benefit-cost Internal Rate of Return (%) Ratio at lOY. -------------------------
Situation A
Si tuat10n S
Sltuation C
--------------------------------------------------------
1 Marginal Farmers
2 Small Farmers
1 .29 ( 1 .05 )
1 .30 ( 1 .04 )
20
12
5 B
3 15
Note: Figures 1n brackets are SIC ratios when imputed costs included in the total cost.
marginal farmers indicating the importance of SUbSidy to
the small borrowers to undertake schemes like digging a
new well.
2 Deepening of well
The parameters of the financial
analysis of this scheme have been computed subject to
the follow1ng assumptions:
290
i i )
iii)
1 V )
.~ ----.. - ~--- , ...
The period of analysis has been taken
* years.
as 10
The desilting of well and other repalr works
** will be carried out in the fifth year.
The water tab lei s assumed to be constant
over the period of analysIs.
The additional benefits are realised from the
fIrst year onwards.
The detaIls are gIven in Table 7.4.
As far as th1s scheme 15 concerned, 1t IS very d,ff,cult to predIct the expected l.fe of the add.t,onal depth achIeved. Moreover, there .s no unIformIty In our sample regarding the depth at WhICh the well was dug further and the addItIonal depth achieved with the help of the loan, etc., However, the benefIts received by sample farmers In terms of lncrease 1n area under irrigatIon and changes in croppIng intensity, have already been d,scussed in SectIon II of Chapter VI. In VIew of the above facts, while applYIng the test of finanCIal VIability, the maXImum permIssIble repayment perIod and not the actual expected lIfe of thiS scheme, has been taken into account. The repayment period varied between 6 and 10 years; the upper lImit of the repayment perIod allowed by the banks, IS 10 years, so thIS has been taken Into account.
** Based on the observations collected from the sample farmers.
291
Table 7.4
Financial Viability Analysis - Deepening of well Scheme
-------------------------------------------------------Block and Benefitl In t e rna I Rate of Return ( 'l. ) Category cost ---------------------------------of farmers ratio at Situa- 5itua- 5i tua-
10% t ion A t ion B t ion C --------------------------------------------------------
Block L
1 Marginal Farmers
2 Small Farmers
Block li
1 Marg1nal Farmers
2 Small Farmers
1. 55 ( 1 .09)
1 .75 ( 1 . 32 )
1 .52 (1.29 )
1.55 (1.10)
50 12 35
> 50 50 > 50
40 20 30
> 50 15 50
Note: Figures 1n parentheses are BIC ratIOS when Imputed costs 1ncluded in the cost.
It is interesting to observe high Blc ratIO as
"J ell as IRR all the cases, making the scheme
fInancially viable one. However, in sltuat10n B, both
the Blc ratio and IRR have been reduced considerably.
In SItuation C, the IRR values indicate that even if the
subsidy component 1S taken as a part of the loan, the
scheme wi I I be financially viable to the small
borrowers.
292
3. Oil Engine Scheme
The paramters of the viability analysIs under
this scheme have been computed subject to the
assumptions:
( i ) The life of the oil engine IS 10 years.
( i i ) The engine is repaired every year; and
<i i i ) The salvage value at the end of 10 years
is 10 percent of the original cost.
Table 7.5
Financial Viability Analysis - Oil Engine
Block and Benefit/ Category cost of farmers ratio at
10%
Block 1.
1 MargInal Farmers
2 Small Farmers
Block li
1 Marginal Farmers
2 Small Farmers
1.30 (1.15)
1.59 ( 1 .30 )
1.62 (1.17>
1. 70 ( 1 . 23 )
Internal Rate of Return (%)
Situation A
> 50
> 50
) 50
) 50
SItuation B
18
) 50
50
50
SituatIon C
> 50
) 50
) 50
) 50
Note: Figures in the parenthesses are B/c ratIos when imputed costs included in the cost.
293
This scheme has been financially viable to all
the farmers and it provides a higher Sic ratio combined
with a higher rate of IRR. Except in the case of
Marginal Farmers in block I whose IRR is very low in
situation B, on the whole, in all other Situations the
IRR is 50 and above 50. It is interesting to note that
in situation C all the four calculated values of IRR are
above 50.
Further, all the three schemes studled were
found as financially viable in terms of their benefit-
cost ratio and internal rate of return. However, under
two sltuations: (i) when the imputed costs were included
in the cost of the scheme, and (ii) when the SUbSidy
component was also considered as loan - the values of
both benefit-cost ratio and internal rate of return got
reduced. ThiS particularly happened ln the case of new
well and deepening of well schemes and was conspiCUOUS
in the case of marglnal farmers who undertook the
schemes.
above
The above findings imply that the small and
marginal farmers need subsidised loans to undertake the
mlnor lrrigation schemes; and their access to the
lnfrastructural facilities has to be improved to enable
them to realise the intended benefits.
294
This scheme has been financially viable to all
the farmers and it provides a higher B/c ratio combined
with a higher rate of IRR. Except in the case of
Marginal Farmers in block I whose IRR is very low ln
situation B, on the whole, in all other sltuations the
IRR is 50 and above 50. It is interesting to note that
in situation C all the four calculated values of IRR are
above 50.
Further, all the three schemes studled were
found as flnancially viable in terms of their benefit-
cost ratio and internal rate of return. However, under
two sltuations: (i) when the imputed costs were lncluded
ln the cost of the scheme, and (ii) when the subSldy
component was also considered as loan - the values of
both benefit-cost ratlo and internal rate of return got
reduced. This particularly happened ln the case of new
well and deepening of well schemes and was consplcuoUS
ln the case of marglnal farmers who undertook the
schemes.
above
The above findings imply that the small and
marginal farmers need subsidised loans to undertake the
mlnor irrigation schemes; and their access to the
lnfrastructural facilities has to be improved to enable
them to realise the lntended benefits.
294
r~ ,~ 1 I~ ','
1 n
Srlvalsava analysed sct1cmc InItIated by U it r'od if dIstrIct
tho vlaolllty
a commercIal (Gu)ardtl by
,j'c',lnn <..:.amplc':, from bIg, medium and small ~ ,,1 ,:',I'f'~, ld,C) l·J('t"(-' 11nJ.nc~d to undertake daIry
·.t:~d'(:,'· Ttley took ttle 0PDor'tun I ty cost 01 ,'. ),ltJ{,\jr '-).':. zero. George P Sand
. ,
'.' ,.'
.;','" \J L Instltutional Finance for ·1··.·(·ln;lr.il'nl, OD. Clt. 1975, p. 90 .
!-, '"1" ,~t l~~n<-, maelc-' by Gl ttlnger regardIng
",J! I" t'
,. (" 1
1 ("PI] t 1 nrJ :; 1 I. t. 1 r I {.1 l' r" ,
t ' ( • r- 1 ell 1 t \ 1 r' ;1 1 --- ---
ttle 1 ilbour cost ldere F'riCl..', J., Economic Pro)C'cts, B""ltlmore .. i!, ( ; (~ ~ , r -, ' Ilur.;1 lns Unlvc-rslly Press,
CHAPTER VIII
SUMMARY OF FINDINGS AND CONCLUSIONS
In this chpater, a summary of theoretical
Issues discussed and findings of the empirical analysis
carried out and the suggestions emanating from the
findings have been outlined.
sma 11
A positive discrimination in favour of poor
and marginal farmers, agricultural labourers and
rura 1 artisans in the credit oriented rural
development programmes and schemes has been observed
Since late nineteen seventies in most of the developing
countries including India. The organised financial
institutions in these countries [Primary Agricultural
Credit Cooperative Societies (PACS), Commercial
and Regional Rural Banks (RRBs) in the case of
Banks
India]
are required to involve themselves in providing loans at
concessional interest rates to those people identifIed
as poor by the state agencies or departments
DIstrict Rural Development Agency (DRDA) in India}. The
role of organised financial institutions, more
speCifically commercial banks, in the proviSion of cheap
296
credit has received both acclaims as well as criticisms
from the economists world over.
Theoretically, one school of thought favours
the involvement of such organised financial institutions
in the subsidised, low interest, credit programmes for
the following reasons:
1) to relieve the rural poor from the clutches of
11)
11 i )
non-institutional credit sources I ike village
money lenders, who not only charge exorbitant
interest rates on poor but in the process squeeze
off their productive assets.
to enhance the participation of rural poor
the production process there 15 a need
in
for
external financial assistance as they are cap1tal
starved.
interest
By granting the poor adequate low
rate loans to acqUIre new assets or to
improve the utilisation of existing assets, theIr
employment and income levels could be 1mproved.
as the utilisation of infrastructural fac1lItIes
and services is found positively associated with
the assets (land holdings, more speCIfically) of
rural households, there arises a need for
improving the access of the rural poor to such
facilities and services by improving theIr asset
base.
297
Hence, it is argued that by a change in the
policy orientation of the organised credit institut1ons,
the assetless and low-capital-base poor also can be
financed adequately which will help them to become
financially viable. And in the process the credit
worthiness of the poor will also improve.
Contrary to the above perspective, another
school of thought disfavours bringing into the scene
financial institutions to provide cheap credit to the
poor on the following grounds.
i )
1 1 )
The government interference, in any form, in the
banking structure 1S not desirable. The 1nterest
rates to be charged by the banks should be left to
the market forces to decide, and not to the
government. The administered structure of interest
rates,
c red i t
under which interest rates on deposits and
are specified and so also the mandatory
allocat1on of credit for specif1c sectors w1th
varying degrees of concessionality,
the banking system.
will distort
As the capital is scarce in developing countr1es
its allocation and use should base on ltS return.
However, in the process of serving a large number
of small borrowers the viability of f1nanclal
298
institutions may be eroded. That is, they can not
all oc at e the capital where the returns are very
high; instead, the capital is siphoned to cheap
credit schemes.
iii) The special programmes and schemes could better be
directed towards the improvement in the functioning
of product markets and e~tension services and
stabilisation of prices, which are, rather, more
powerful in determining the economic viability of a
poor person, say a small farmer, than the credIt
avaIlability.
Hence, the state should not Interfere In the
working of financial institutions either by fIXIng the
Interest rates or by llmiting their portfolio
allocations.
Yet another school argues that, without
disturbing property and social relations which presently
prevail in the rural areas of developing countries, no
amount of rural development programmes, even If they are
Implemented by application of business management
methods and sophisticated technologies, would succeed in
the upliftment of the poor. That is, gross inequalities
in the distribution of land, and other assets reduce the
impact of technological advances on employment and
levels of living among the poor. This school of thought
299
is against the attitude of helping th~ poor tv i th
subsidies and free doles by the government and the non-
governmental
tions.
organisations (NGOs)/voluntary organisa-
The controversial view pOInts apart,
empirical/field situation in the rural areas
developing countries like India is more complex
the
of
and
compl icated. The strategies followed by the government
of India, to improve the economic condItions of the
rural poor, time and again, orient with the involvement
of credit institutions. Prior to the nationaiisation of
major commercial banks in 1969, it was cooperatIve
credit societies which were expected to playa catalytic
rol e in the agricultural and rural
programmes. But after 1969, the commercial
development
banks and
their foster-child Regional Rural Banks (RRBs) WhICh
were established in 1975, are increasingly Involved In
fInancing the rural oriented schemes and programmes.
The perspective on which the rural development
programmes are formulated and implemented in IndIa IS on
the lines of "Rural Development: Sector Policy Paper"
of the World Bank (1975). The paper observed that
·'Rural Development is a strategy designed to improve the
economic and social life of a specific group of people -
the rural poor. It involves extending the benefits of
300
development to the poorest among those who seek a
livelihood in the rural areas. The group includes small
scale farmers, tenants and landless".
In India, the thrust of rural credi t pol icy
has been on the provision of timely and adequate flow of
credit, especially to meet the requirements of small and
marginal farmers and the weaker sections of the SOCiety,
such as agricultural labourers and rural artisans. The
Seventh Five Year Plan Document (1985-90), Government of
India, listed the following as the instltutlonal
policy:
credlt
i 1
11)
To secure an
institutional
development;
To direct a
increase in the total volume of
c red i t for agricul ture and rura I
larger share of the credit to the
weaker sections;
i i 1) To reduce the regional imbalances ln the
1 V 1
v)
availability of credit;
To bring about greater co-ordinatlon between
different credit
agency system; and
institutions under the multl-
To improve the recovery of institutlonal loans to
ensure continuous re-cycling of credit.
301
Hence, in accordance with the above policy, a
large number of rural poor oriented programmes
Integrated Rural Development Programme ( I RDP )
like
and
Differential Interest Rate Scheme are under the process
of implementation and the commercial banks and RRBs are
taking care of the loan component; the subsidy amount is
sanctioned to the beneficiary by the government
the DRDA.
through
The secondary data analysis on the growth of
rura 1 credit in India shows a phenomenal growth of
commercial banks and RRBs in terms of number of
branches, deposits, credit disbursement, priority sector
advances and coverage of small borrowers ln the rura 1
areas (Chapter I I I).
The mechanism by which these banks flnance the
rural poor can be briefly stated as below:
The specially designated agency called DRDA at
the district level with the coordinatlon of respectlve
Block
Level
persons
Development Offices (BDO) and help of Vlllage
Workers (VLWs) identifies the eligible/poor
from the rural households by conductlng an
economic survey on such households.
After the survey, with the help of credlt
institutions (which are coordinated by the Lead Bank of
the district), bankable schemes/projects are prepared
302
<District Credit plan). While formulating such schemes,
the resource endowment/potential of a particular region,
and the level and availability of infrastructural
facilities are taken into account. That IS, area
specific, resource oriented, technically feaSible and
financially viable schemes are prepared.
The identified beneficiaries, In accordance
wi th the schemes formulated (such as dairYing, minor
irrigation, animal husbandry, artisans development), are
supplied with assets like milch cattle, sheep, goats,
bullocks,
implements,
bullock carts, tyre carts, tools and
oil engines and electric motor pumpsets.
Also, under minor irrigation schemes, the financial help
is extended to dig a new well, deepening of well and for
laying pipe line. To acquire these assets and to
improve the farming activities the loans are prOVided by
the financial institutions along with a subSidy from the
government. It is sufficient the beneficiaries repay
the loan component. The rate of subsidy IS fixed on
the basis of beneficiaries' economic as well as SOCial
status - 25 per cent for small farmers, 33 per cent for
marginal farmers and agricultural labourers and 50 per
cent for schedule caste agricultural labourers and women
beneficiaries.
303
(District Credit plan). While formulating such schemes,
the resource endowment/potential of a particular region,
and the
facilities
specific,
level and availability of
are taken into account.
resource oriented, techn1cally
financially viable schemes are prepared.
The identified beneficiaries,
infrastructural
That 1 S , area
feaSible and
1n accord anc e
wi th the schemes formulated (such as dairY1ng, mInor
irrigation, animal husbandry, artisans development), are
supplied with assets like milch cattle, sheep, goats,
bullocks, bullock carts, tyre carts, tools and
implements, oi 1 engines and electric motor pumpsets.
Also, under minor irrigation schemes, the financ1al help
is extended to dig a new well, deepening of well and for
laying pipe line. To acquire these assets and to
improve the farming activities the loans are prov1ded by
the financial institutions along with a SUbS1dy from the
government. It is sufficient the beneficiar1es repay
the loan component. The rate of SUbS1dy 1S flxed on
the basis of beneficiaries' economic as well as SOCial
status - 25 per cent for small farmers, 33 per cent for
marginal farmers and agricultural labourers and 50 per
cent for schedule caste agricultural labourers and women
beneficiaries.
303
It is expected that due to the enhanced asset
position and improved utilisation of existing assets,
the beneficiaries' employment and income
increase.
levels would
Section
The
I I )
review of empirical studies (Chapter
highlighted certain drawbacks
II,
the
implementation and in
specially designed
the working of
for the poor.
the schemes
Improper
identification of beneficiaries leading to
misutilisation of schemes, more particularly in respect
of the subsidy component, was brought out by some
stUdies. A few studies pointed out the lack of
supervision and follow-up by the block and bank
officials as the reasons for the poor performance of the
programmes leading to the problems of loan recovery and
the overdues. These drawbacks notwithstanding, some
studies did find improvement in the economiC condition -
in terms of assets, employment and income of the
beneficiaries after availing the loan.
The approaches followed by the earlier studies
to analyse the impact of special schemes on the poor not
only varied widely, but also their objectives and scope
were found to be varying. A very few studies worked
out the Viability of the loans provided to the small
borrowers. The shortcomings and drawbacks of the
304
earlier studies/approaches with respect to samplIng,
measurement, etc., were pOInted out (Chapter I I ) .
Keeping in view the research gaps CIted, the pr-E'sent
study was taken up.
The study focusses on the small borrowers who
have availed institutional credit and examInes VarlOUS
aspects relating to it. To elaborate, the study has set
before itself the following objectives:
( i )
( i i )
(iii)
( i v )
To study the procedures of benefICIary
identification
banks;
and project formulation by the
To examine the accessibility of the selected
small borrowers to the bank credit, lnfrastruc-
tural facilities and services;
investigate into the utilisatlon pattern of To
the loans borrowed by the selected small
borrowers;
To assess the changes in the economIc
of the selected borrowers between the
post-loan periods;
condItIon
pre-and
(v) To find out the rate of return on the investments
(v i )
made by
viability
borrowers;
To examine
the small borrowers and the fInancial
of the loans sanctIoned to such
the loan repayment performance of the
selected borrowers.
305
In order to conduct the present
Coimbatore district in the State of Tamll Nadu,
study,
India
was purposively selected by keeping in mind certain
like the relative concentration of indicators
agricultural labourers, the allotment of funds for the
benefit of small borrowers and the performance In th"
implementation of special schemes. On the basis of
similar
blocks
(Block
(Block
indicators referred above two blocks out of 21
in the district were selected Madathukulam
I ) , a relatively developed area and Pongalur
II) a less developed area. On the basis of an
analysis carried out on the credit-oriented schemes
implemented for the benefit of small and marglnal
farmers and agricultural labourers in these two blocks,
two relatively important schemes namely, mlnor
irrigation scheme and dairy loan scheme only were taken
up for the study. Under minor irrigation scheme, three
types were distinguished: new well, deepenlng of well
and oil engine.
under
Credit facilities to prospectlve beneflciarles
the two selected schemes were found to have been
implemented through commercial bank bra<lches and/or
Primary Land Development Bank operating in the two
selected blocks respectively. Hence, beneficiary lists
those of the selected schemes were obtained from
branches for the purposes of the field investigatlon.
306
All the borrowers who borrowed mlnor
irrigation loans for digging new well, deepEning of well
and to purchase oil engines from the above said
institutions between 1978 and 1982, together numbering
74, (40 from block I and 34 from block II) were selected
to conduct the survey. In the case of dairy scheme
however, as the number of beneficiaries was very large
by adopting random sampling method 187 beneficiaries
(108 from block I and 79 from block II) from the three
categories of borrowers, namely, small farmers, marginal
farmers and agricultural labourers were selected.
The primary data collected was tabulated and
analysed by using the statistical tools and methods like
averages, percentages, regression analysis, and ratios
and financial viability analysis.
has been classified schemewise
facilitate a comparative analysis.
The collected data
and categorywise to
To find out the impact of dairy loans on the
income, employment and asset position of the selected
beneficiaries, two methods have been adopted. The first
one is the inter-temporal (before-after) method wherein
the post-loan income, employment and asset position of
the selected beneficiaries have been compared With that
of their pre-loan levels. The differences found between
the two points of time are attributed to the impact of
307
,
the loan. The second method is the cross-sectional
analysis in which the income levels of the selected
beneficiaries are compared with that of selected non-
beneficiaries and the difference in income level of
beneficiaries, if any, has been attributed to the impact
of the financed schemes.
Further, to capture the impact of dai ry loans ln
a comprehensive manner, the income and employment of the
selected small and marginal farmers, who took dairy
loans have been classified into three categorles: net
farm Income and employment, net non-farm income and
employment and net income and employment from dairying.
The pre-loan levels of these three categorles of income
and employment are compared with that of post-loan
levels to reveal the impact of dairYlng. Similarly, the
income and employment levels of selected agricul tural
labourers have been classified into three types: wage
employment and income, employment and income from other
than wage labour and employment and lncome from
dairying. The pre-loan position with regard to the
above mentioned three categories of income and
employment has been compared with that of post-loan
position to find out the impact of dairy loans.
Apart from the above, a productlon functlon
has been used to know the influence of selected
independent variables on the milk production. And to
308
evaluate the financial viability of the dairy loans four
criteria are used. They are, (i) Pay-back period,
(iii) Benefit-cost ratio, and
<l i )
( i v ) Net present value,
Internal rate of return.
To work out the lmpact of minor IrrIgation
schemes on the farm economy of the selected small and
marginal farmers, the inter-temporal approach (before
and after the loan) has been adopted. The changes which
are observed in the case of selected variables due to
the minor irrigation works undertaken by the selected
beneficiaries have been attributed to the impact of such
loans. The details of variables selected, the methods
of computation of cost and value of output are discussed
in the respective sections of the relevant chapter
(Chapter VI). To measure the financial viability of
benefit-cost minor irrigation loans two criteria: (i)
rat io and (i i) internal rate of return, are used.
The important findings of the study are as follows:
Dairy Sc:heme
While identifying the eligible beneflclarles
for dairy loans no household survey was done in both the
blockS. The beneficiary lists were prepared by VLWs
arbitrarily with th~ help of secretaries of MPC5s.
309
The literacy rate among the selected
agriculture labourers was found to be very low compared
to that of the small and marginal farmers.
The access to the MPCS, of the selected
beneficiaries was fairly satisfactory. However, in one
village the Scheduled Caste agricultural labourers are
deliberately not allowed to become members on social
considerations. This social barrier has become a major
limiting factor in the way of economic 1mprovement of
such labourers.
The access of the selected beneficiaries to
the bank credit for a second dairy loan or crop loans
was found very low even in block I which 1S better
placed in terms of banking facilities. Simi I ar ",as the
case wi th their access to veterinary hosp1tals and
cattle insurance. This implies that the mere presence
of financial institutions (banks, ASCS), and veterinary
hospitals does not have any impact on the small
borrowers unless they are made to utilise such
facilities.
The overall percentage of misut1lisat1on of
dairy loan was found as 17.6. In other words, 33 out of
187 beneficiaries selected were found to have sold thelr
mi lch animals at the time of field survey. Low mllk
yield was the reason attributed to this phenomenon. As
they were supplied with low quality animals
unremunerative and hence the sale of animals.
310
it became
Returns to Investment in Dairy Scheme
Marginal Farmers
Sma 11 and
Those beneficiaries who were able to continue
maintaining the milch animals realised an inc re ase in
their income. The average net income from daIrYIng has
increased from Rs 360 (before the loan) to Rs 1746
(after
8lock-I
the loan) in the case of marginal farmers In
and from Rs. 227 to Rs. 835 for their
counterparts in 8lock II. In the case of small farmers
in 8lock-I the increase has been from Rs 457 to Rs 1531,
and for their counterparts in 8lock II the increase has
been from Rs 478 to Rs 822. The increase in income has
been more pronounced in the case of marginal
than small farmers.
farmers
The rate of return per rupee invested IS
higher in the case of marginal farmers followed by the
small farmers in Block I. However, it is very low in
the case of small and marginal farmers in Block II. The
point to be emphasised here is that when the incremental
income-investment ratio is worked out for the ac tua 1
loan amount sanctioned, the ratios turned out to be very
low. Had they purchased the animals for the entire
amount without any leakage the rate of return would have
been higher than what is obtained here.
311
.. "--,
The level of income of the non-benellclary
households of both small and marginal farmers In the two
blocks is found lower than the beneficIary households.
Significant improvements ln the employment
level and asset position (especially llvestockl of the
selected small and marginal farmers In both the blocks
are observed.
The production function analYSIS carrIed out
revealed the significant influence of concentrates all
cakes, cotton seed and rice bran on the value of mIlk
production (in the case of small and margInal farmers).
The loan repayment performance of the selected
small and marginal farmers in both the blocks was found
satisfactory. The percentage of benefICIarIes who
repaid the loan according to schedule of payment was
very high (75 Xl in the case of margInal farmers In
block I and was low (36 Xl in the case of theIr
counterparts in block II. This percentages were 55.5
and 50 in the case of small farmers in block r and r I
respectively. Two factors which facilitated the loan
recovery were the membership of the selected farmers In
MPCS and the tie-up arrangement that existed between the
MPCS and the branches of commercial banks In the study
area.
312
Dairy Scheme and Agricultural Labourers:
The impact made by the dairy scheme on the
employment level and the asset position of the selected
agricultural labourers was found as significant.
Mean differences between pre-and post-loan
incomes and their significance tests revealed that both
the sub-groups - SC labourers and 'other labourers' - in
the two blocks have registered a significant (at 1 per
cent level) increase in their net income from dairying.
But the level varied across the blocks and social
groups. In absolute terms the increase in the net
income of SC labourers was Rs 303 and Rs 375 In block I
and block II respectively. The corresponding figures
for other agricultural labourers were Rs 428 and Rs 497.
The rate of return per rupee invested in dairy
scheme was found as very low in the case of all
labourers. The reasons attributed to this situation
were the low milk yield and poor maintenance of the
milch animals by the beneficiaries.
When the total household income of
agricultural labour beneficiaries was compared with non-
beneficiary households of the same category, the
difference in their income was found to be considerable.
Due to the higher income from dai rying, the
313
benef,ciary SC and non-SC households are better placed
than the corresponding non-beneficiary households.
The results of production functlon analysIs
for the category of agricultural labourers considered
together show that the selected independent variables
namely, value of fodder and value of concentrates In
case of beneficiaries in block I and the value of
concentrates and labour expenses in case of block I I
significantly influenced the value of mllk productlon.
The loan repayment performance of the
agricultural labourers, particularly those belonglng to
SCs, was poor. That is, the percentage of cases of
default was found very high in the case of above
mentioned category of agricultural labourers in both the
blocks. The reasons for the poor repayment performance
were noted to be poor quality of the anlmal reflectlng
in low milk yield and low income, poor feeding practices
and also lack of supervision by the block as well as
bank officials.
Financial Viability Analysis Dairy Loans
The financial viability analYSIS revealed the
following: The worked out pay-back perlod for the dairy
loan scheme varied from 3 to 4 years; however, when the
314
imputed costs were included in the paid-out costs, this
period increased to 6 to 7 years. The IRR was higher in
the case of all the three categories of borrowers but
turned out as very low when the imputed costs were also
taken along with the paid-out costs. The benefit-cost
ratios estimated were found satisfactory for all the
categories excepting agricultural labourers In block T.
The economic viability of the daIry scheme was
also measured by working out the repaying capacity.
When the expected net income and the actual inc.ome
realised by the dairy scheme were computed and compared,
it was found that only the marginal farmers in block I
had adequate income and relatively better repayment
capacity and these were very low in the case of
agricultural labourers in the same block. In block I I
the repayment capacity of all the three categories of
the small borrowers was found as low.
Minor Irrigation Scheme
The overall literacy rate of the selected
small and marginal farmers was found as 51 per cent.
Their membership in ASeSs and the utilisation of
benefits of the Training and Visit System (T and V) were
poor. This was mainly due to the lack of access the
selected farmers had to the services of ASeS and T & V
315
System.
credit
Similarly, the selected farmers access to bank
was poor. Only four out of forty farmers
selected had received crop loans in block I whereas in
block II none was found to have received crop loans.
In the case of all the seven farmers who
have taken loans to dig new wellS, the bank officials
undertook the project formulation exercise befor.
sanctioning the loans. For the rest of the schemes no
such detailed advance flnancial analysiS was done.
As far as utilisation of loan is considered,
only in 2 out of the 74 cases, it was found that big
farmers got oil engines in the name of small farmers.
The loan and subsidy amount sanctioned to the
selected beneficiary farmers were found adequate e)(cept
In the case of new well scheme. After the schemes were
undertaken, the following are the changes observed:
schemes
New well
enabled
scheme as well as
an increase in the
the other
area
two
under
Irrigation. A significant change in the cropPing pattern
In favour of commercial crops - was observed after the
lncrease in area under irrigation. Increase in cropping
intensity was comparatively more in block II compared to
block I. However, the value of inputs used per hectare
was more in block I than in Block II.
316
Th e studied schemes have resulted in an
improvement in the income level of the selected farmers
in varying degrees in both the blocks. In Block I, the
percentage increase in net income is higher in the case
of new well scheme; both the small and marginal
have realised increase in their income levels.
farmers
However,
marginal in absolute terms, the net income per acre of
farmers who undertook new well scheme is the lowest (Rs
1556) compared to other schemes. The net income of
small farmers has increased substantially in the case of
new
case
have
the
the
after
case
well
well and oil engine schemes and marginally 1n the
of deepening of well. On the whole, the schemes
resulted in an improvement in the income level of
sample farmers. Another striking feature 1S that
output-cost ratio has substantially been increased
the loan in the case of small farmers. In
of margInal farmers, with respect to deepening
the
of
and oil engine schemes the output-cost ratio has
decreased slightly and in the case of new well scheme It
has registered a marginal increase.
In Block I I the net income per acre ln
absolute terms is low compared to block I, the lowest
being Rs 1113 in the case of small farmers who undertook
oil-engine scheme. However, the percentage increase ln
net Income per acre of them is higher (lOB 'l.) and the
output-cost ratio also has increased marginally. As for
317
as the marginal farmers are concerned the oil engine
scheme has benefitted them most: the output-cost ratio
increased from 150 to 210 between the two periods and
their net income increased to the tune of 261 per cent.
The loan repayment performance of the selected
farmers in both the blocks waS found better. Majority
of them found to have repaid the loans promptly. The
regular repayments by some of the farmers were also
observed. The three important factors, among others,
that were attributed to the prompt repayment of loan
instalments by the selected farmers were: the subsidy
electriCIty component of the loan, tree/conLessional
charges and additional income they were able to receive
by undertaking the minor irrigation schemes. And only In
a few cases - 5 out of 38 in block I, and 2 out of 34 in
block II defaults were found. The inadequate Income
was the main reason attributed for the non-repayment of
loan.
The financial viability analysis revealed the
following:
In the case of new well scheme the benefit
cost ratio was same for both small farmers and marginal
farmers
returns
indicating a positive if not very high (1.3 Xl
from the scheme. However, the IRR is high in
the case of marginal farmers compared to the small
farmers. When the imputed cost is included, the IRR
318
becomes very low and at the same time benefit cost rat10
also equals to one indicating the
contribution of own human 1 abour
fact that
is turning
the
the
otherwise non-viable scheme into a viable activity.
When the subsidy amount is included in the cost, the IRR
1S reduced in the case of marginal farmers indicating
the importance of subsidy to the small borrowers.
80th benefit cost ratio and IRR were found
high 1n the case of deepening of well scheme. Similarly
the oil engine scheme was found as financially viable in
respect of all the sample farmers concerned and it led
to a higher benefit cost ratio and IRR. However, under
two situations: ( i ) when the imputed costs
1ncluded in the cost of the scheme, and (ii) when
subsidy component was also considered as loan
were
the
the
values of both benefit-cost ratio and internal rate of
return got reduced. This particularly happened in the
case of new well and deepening of well schemes and was
conspicuous in the case of marginal farmers
undertook the above schemes.
The above findings imply that the small and
marginal farmers need subsidised loans to undertake the
mInor irrigation schemes; and their access to the
infrastructural facilities has to be improved to enable
them to realise the intended benefits.
319
_..e: -
Suggestions
findings
the rural
In the light of the above analysis and
the following suggestions are made to improve
credit delivery system which in turn may
narrow down the 'differential access to credit' and its
effective utilisation by the small borrowers. While
doing so, the recent policy changes announced both by
the central and state governments with respect to rural
credit structure, and the latest ideas e~pressed about
the rural credit 3ystem by a few scholars are also kept
in mind.
(i) In the process of helping the rural poor
under special programmes like IRDP three agencies are
involved - the DRDA, Block Development Office (BDO) and
the financial institutions like commercial banks and
RRBs. The DRDA draws up a programme for
covering different types of activit1es
categories of borrowers amongst small
every year
and varlOUS
and marg1nal
farmers and agricultural labourers. The Block level
machinery 1S e~pected to conduct household surveys to
identify eligible beneficiaries and formulate suitable
schemes in consultation with those identif1ed. Each
beneficiary is tagged to an individual bank branch to
320
get necessary financial assistance. The subsidy amount
to the particular beneficiary is released to the
respective bank branch and the branch sanctions the loan
along wlth the subsidy. A Purchase Committee IS formed
at every block level to get quality assets to the
beneficiary. Thus, the scheme envisages close
coordination of all the developmental agencIes and
fInancial institutions at block level.
However, during the field survey was
observed that in majority of the cases the much expected
coordination
was absent.
among the above three major functionaries
The bank branch would receive the list of
benefIciaries from the block office suggesting i t to
sanction the loans. The bank would not be having any
information or record about the beneficiaries. ThIs
happens, inspite of the fact that the bank branch has
its own financial norms/scale of finance and well
prepared financially feasible schemes to suit
beneficiaries. Thus, at the beginning itself
involvement of banks was found limited. Once the
the
the
loan
and subsidy is released and the beneficiary is supplIed
with an asset, the block machinery withdraws from the
scene and the onus of recovering the loan falls on the
bank branch. The bank has to chase the beneficiarIes to
recover the loan.
321
To avoid the above described irritant in the
smooth implementation of the schemes, it IS essentIal
that there is strict adherence of the agencies to the
guidelines given to them by the government. Apart from
this, a suitable publicity in the mass-media about the
credit schemes would help to create awareness among the
rural people. The awareness created among the poor
people regarding income assessment procedures, viable
schemes, loan and subsidy component, utilIsation of the
scheme, repayment procedures, the
extension services and marketing facilities and
lncentives would go a long way ImprovIng
of
the
the
implementation and working of special schemes deSigned
for the benefit of rural poor.
.. ;"
( i i ) With respect to dairy loans the recovery
rate was very high whereever there eXlsted a close
coordination or a tie-up arrangement between the bank
branch and the MPCS. This is a clear example showlng
how an effective cooperation between two agencies brlngs
fruits to all concerned. This should be emulated by the
district, block and village level functionarles wlth
respect to other schemes too in all the places.
(iii) Provision of quality animals ensures
higher income to the beneficiary. To a benefICIary who
successfully utilises the first loan, a second loan can
also be sanctioned to enhance his income further.·
322
( i v ) Only a viable eLonomiL aLtivlty whiLh
is likely to raise the inLome level of the benefiLiary
on a lasting basis should be taken up for
implementation. The emphasis should be on finanLlng one
or two sLhemes in whiLh the benefiLiary has a genU1ne
interest. This will ensure a better utilisation and
improved returns from the sLheme.
( v ) Though the demand Lurve for mllk 1S
always steep upwards right (i.e. along with a Lontlnuous
increase in the priLe of milk) in Coimbatore distriLt
and ensures a fair inLome to those who possess m1lLh
animals, the undue emphasis given to the dairy sLheme 1n
the rural poor oriented speLial programmes should be
avoided. The reason is that the supply of good quallty
milLh animals on a sustainable basis to the prospeLt1ve
benefiLiaries is not possible. Therefore, Lal f rearing
sLheme should be enLouraged, for it is a natural
LonLomitant of dairy development sLheme.
( vi) Future availability of good quallty
mi ILh animals depends upon the importanLe attaLhed to
Lalf rearing at present. As per the DistriLt Cred1t
Plan,! Coimbatore district, by rearing two ~eifer Lalves
the beneficiary can get a net inLome of Rs 5000 to Rs
6000 after 20-24 months time. That is, the value
addition Lurve has mULh steeper upward slope after about
10 to 12 months in the Lase of Lross-bred Lalves.
323
(v i i ) For the proper utilisation of dairy
scheme and calf rearing, the feed supply and veterinary
services have to be ensured. The genetic quality of
livestock can be improved by increasingly resorting to
maintenance of the cross-bred calves. Training the
beneficiaries in management of milch animals and milk
production practices assumes significance as the cross-
bred animals are more prone to diseases. In
otherwords, the risk involved in rearing cross-bred
calves and milch animals is very high compared to the
traditional breeds. Increasing facilities for vaccina-
tion and cattle health services would reduce such risks
to a great extent.
(viii) The emphasis placed here on the calf-
rearing scheme as well as milch animal scheme is not
merely on the basis of beneficiaries' point of view but
also from the view point of district economy as a whole.
That is, the Livestock Census2
of Coimbatore district
for the years 1982 and 1987 reveals that the tot al
number of cattle has declined from 4,86,616 in 1982 to
3,35,287 in 1987 (-38 X). The number of buffaloes has
declined from 2,07,788 in 1982 to 1,54,245 in 1987
(- 25.77 X). Also it is estimated that the fodder
production in the district showed a deficit of 1.58
million tonnes in the case of dry fodder and 1 .21
3 million tonnes in the case of green fodder. Therefore,
324
the district administration can either take up efforts
to increase green fodder production besides improv1ng
the genetic quality of milch animals or can compl~tely
give up calf rearing programme. That is, it is
economically unfeasible to rear cross-bred heifer calves
under fodder shortage situation as observed by NABARD4.
( i x ) Wi thout fodder base and regular feed
supply it is highly difficult to maintain milch animals.
And it was observed that the cost of animal feed has
increased
production
much faster than the price of milk
5 during the last ten years.
and milk
So, by
increasing the production of cattle feed by encourag1ng
such industries on a large scale on a priority basis, it
would not only be possible to ensure feed supply but
also to reduce the cost of feed.
(x) The identification of diversified schemes
would base on the resource potential/endowment of the
blocks on the one hand and the existing occupational
pattern of the beneficiaries on the other. Then only
the schemes implemented assure an lncrease 1n the
employment and income to the beneficiaries.
( xi) The percentage of landless households
has been one of the highest in Tamil Nadu, 19.13, next
only to Maharastra having 21.24, while that at all-Ind1a
325
level has been 6 11.33. Apart from this, what we
observed during the field survey in the selected blocks
calls for an increased outlay on non-land based schemes,
tha t is, the exodus of both agricultural labourers and
marginal farmers to the nearby cities and towns as
construction workers. Hence, the identification of non-
land based schemes assumes more signifIcance.
As far as minor irrigation scheme IS
concerned, th e following are a few points and
suggestions that can be postulated:
(x i i) Except in a few pockets, diggIng of new
wells In block II is an uneconomic proposition as the
ground water potential of the block is already over-
7 tapped. Wherever ground water units are available,
digging of wells and deepening of existing wells could
be undertaken but with an increased scale of finance as
the labour charges have increased and the water table
has declined not only in this block but also In the
8 district as well. Further, some portion of the area of
this block receives canal water supply in alternate
years, tha t too, of course, depending upon the water
level in the Aliar Reservoir Project. The poor
maintenance of supply channels was observed during the
field survey. This can be avoided to increase the area
under irrigation and also for the efficient utilisation
of the scarce water.
326
.-.C -
In block I, there is still much scope for both
digging new wells and for deepening of existing wells as
9 per ground water surveys . It has been reported that
around 1500 more new wells/digging of the existing ones
are possible in this 810ck10
. This indicates that there
is good scope for further minor irrigation activities.
The scale of finance should be increased for all the
minor irrigation schemes - new well, deepening of well,
oil engine, electric motor pumpset, laying pipe lines
as the cost of materials as well as labour charges have
increased over the years.
(xiii) At present the electricity is supplied
at free of cost to the farmers (for irrigation purposes)
of T ami I Nadu. Earlier, only the small and marginal
farmers availed this facility (free electricity supply)
and the other farmers paid electric charges on the basis
of horse power of their motor pumpset (Rs 100 per h p
per annum, payable in two instalments). Wi th
electricity supply being free to all the categories of
farmers,
farmers
of Tami 1
it benefitted not only the large and medium
to a great extent, but also increased the loss
Nadu Electricity Board <TNES) , 1 1
as l<le 11 .
(There are other reasons to the loss of TNEB 11k e
transmission loss). Crippled with deficit, the TNEB has
nOLlJ introduced a new scheme by which any farmer who
327
wants to get an electricity connection for the electric
motor pumpset fitted to the well has to deposit Rs
20,000 with the TNEB. Thus, even if a small or a
marginal farmer is financed along with subsidy to dig a
new well and/or to purchase an electric motor pumpset,
getting the electricity connection
to the above policy.
becomes extremely
difficult due To avoid this
situation the following is the suggestion made:
restored.
The imposition of power tariff has to be
The removed electricity meters of pumpsets
should be refitted, otherwise, the amount of electricity
consumed goes un~ccounted. The new electricity charges
can be levied on the basis of a slab system to benefit
the genuine small and marginal farmers and at the same
time to make the medium and large farmers to pay for the
use of electricity, a scarce input. For e><ample, the
slab system can be (tentative) of the following type on
an annual basis:
For the first 1000 units
Second 1000 units
Third 1000 units
Fourth 1000 units
Fifth 1000 units
and above 5000 units
free
5 paise per unit
10 paise per unit
15 paise per unit
20 paise per unit
25 paise per unit
328
-:-'.
This wi 11 put an end not only to the
indiscriminate use but also to the inequality the
supply of electricity to the farmers.
( w i v) The access of the small borrowers to
the banks, ASCSs, MPCSs, veterinary services, cattle
insurance schemes, ewtension programmes and marketing
facilities cannot be improved by merely establishing
them in the rural areas as revealed by the present
study. It is necessary that all the restrictions and
obstacles (both social and economic) in the way of
utilising those services by the poor should be removed.
This requires imparting of awareness among the rural
poor about the availability of services and their
SIgnIficance.
( x v) The repayment performance of the small
borrowers can be improved by the following (a) phasing
out loan instalments, (b) follow up services, (c)
arranging marketing facilities, and (d) taking stringent
measures against those who default.
( x vi) Recently it has been reported that the
RBI is contemplating on, among otrer things,
modification of rural banking structure, increasing
interest rates on agricultural loans, reducIng the
all oc at ion for priority sector lending and effectIng
changes in the directed programmes of rural . 12
credIt.
329
-,.....,--~- .
Wh i Ie, any step to improve the rural banking structure
is most desirable, the increase in agricultural lending
rates, reduction in priority sector lending and credit
oriented programmes may lead to undesirable
consequences. The increase in lending rates may force
the farmers, especially the small and marginal farmers,
to move towards the non-institutional sources like money
lenders. It has been observed that an increase In the
rate of interest for the purpose of equating supply and
demand is likely to affect the loan quality by reducing
the probability of repayment. That is, the hIgh-quality
borrowers will seek credit elsewhere or depart from the
market altogether, leaving only borrowers who are more
l ·k ltd f It h bl" t" 13 1 e y 0 e au on t eir olga lons
The expected reduction of priority sector
lending from the existing 40 per cent to 10 per cent
may reduce the quantum of credit available to the
sectors like agriculture from the organised finanCIal
InstItutions. The announcement that the ten per cent
allotted under priority sector lending will excluslvely
be earmarked to the small and marginal farmers may sound
we 1 1 , but at the same time, the mechanism should be
fool-proof to ensure that only those farmers who are
el igible will get such loans. The credit rationIng,
with a reduced outlay, is going to be a real challenge
In the years to come.
330
-' -::-
(xvii) Instead of abolition of directed rural
credit programmes, which may further deprive the rural
poor, the quality of rural lending can be improved.
(xviii> In accordance with the national mood,
there is a proposal from some quarters for bank
denationalization 14
in the country. This idea is put
forward to stall the decline in the profitability of the
banks and other evils that plague the banking industry.
The suggestion here is that, without gOing into the
details of it, the shortcomings in the banking system
can be removed by taking effective steps within the
e><isting framework. Denationalisation of banks will
take back to pre-1969 type of situation wherein the
rural people may not get adequate credit from the banks.
(x i x ) The political involvement the
conduct of "Loan Melas" and agricultural debt relief has
reduced the loan recovery of financial . . . 15 institutions.
This has eroded the lendable resources of many banks.
Keeping away the political interference would make the
banks serve better in the rural areas.
Finally, the question of viability of loans
sanctioned to the small borrowers has to be answered.
Theoretically, two opposite views have been
pu t forward:
331
,-:: .. ~--'- -. -.-"-_ . . - -.- ::
la) When subsidised loans are given to small borrowers
that would help them to become economically
v I ab 1 e; and
(b) If a bank goes on expanding its credit facilities
to a large number of small borrowers its viability
will be at stake.
The results of the present study suggest tha t
subsidy is an essential component which helped the
schemes undertaken by the small borrowers to become
financially viable. Implied in this is that without
subsidy the benefit-cost ratio and in te rn a 1 rate of
return would be very low. Therefore, subsidy is
Indispensable whIle sanctioning loans to small
borrowers.
However, it was observed that subSIdy has
become a source of misutilisation and/or exploitation.
That is, in some cases the subsidy was adjusted WIth the
loan to show a good recovery performance; in a few cases
the officials misappropriated the subsidy amount and the
mi lch animals were purchased only for the loan
component, thus, low qual ity animals Clow mi lk yield)
were
I 1985 )
supplied to the beneficiaries. The PEO 16 study
also reported some cases of misapproprIatIon of
the subsidy amount with the connivance of the bank and
block officials. It suggested that the government may
332
~::.r.2;::'
explore the possibility of introducing suitable checks
and procedures to prevent such malpractices.
A suggestion to avoid this type of
mlsutilisation of subsidy is as follows:-
Instead of subsidy the full amount can be
sanc t ioned as a loan. And to give an incentive to the
beneficiary to be regular in repayment, say once three
fourth or two third or half of the amount is repaid
depending upon the economic/social status of the
beneficiary - the remaining amount can be written off,
as shown below:
Category of Borrowers
1 Small Farmers
2 Marginal Farmers and agricultural labourers
3 Agricultural labourers who belong to SC & ST category
4 Women beneficiaries
Once a small
Loan amount Incentive
(in Rs) (in Yo) (in Rs)
4000 25 1000
4000 33 1333
4000 50 2000
4000 50 2000
farmer repays Rs 3000, the
marginal farmer and agricultural labourers Rs 2667 and
beneficiaries belonging to SC or ST or women Rs 2000,
then the remaining amount can be declared as written
off. That is, the loan is subsidised at a later stage.
333
.; ..;:
':' . -: -:
This method has some distinct advantages: One 1 S ,
unless the beneficiary repays the stipulated amount,
he/she will not be permitted to avail the subsidy
component and this becomes a binding on his/her part
forcing him/her to repay the amount at the earliest - a
conditional loan. Secondly, the beneficiaries may not
easily allow a portion of the loan amount to be taken
away by the middlemen as it happens in the Case of
subsidy. Finally, only those beneficiarIes who have
genuine interest in the schemes will come forward to
take up these loans thus, keeping out those who have
111-designs to misuse the subsidy. As a result, the
casual handling of the schemes, particularly at the
lower level represented by VLWs, would be halted.
In conclusion, viewed from the right
perspective, and as hoped by Gadgil,17 if the package of
practices developed under NABARD's "Pilot ProJect for
Improving the Credit Delivery System" (adequate field
staff, greater mobility for field visits, regular inter-
face between borrowers and bank staff, training of bank
staff and technical advice to borrowers) 15 globally
adopted, which may be feasible due to w1der Interest
margins, there could be a perceptible improvement In tile
quality of formal lending to small borrowers and In
their loan recovery.
334
Notes and References
1 District Credit Plan 1983-85, Coimbatore District, QQ.. cit., p. 115.
2 This information and other statistics pertaining to Coimbatore district were taken from Ramasamy C and Chinnadurai, M. "Agricultural Economy: Problems and Prospects", (Paper presented at a Seminar on Economic Development of Coimbatore DistrIct, held ;t Bharathiar University, Coimbatore on 22nd March, 1993) .
3 Ibid.
4 Quoted in Gadgi I M V., "Future of Institutional Agricultural Credit in India: Likely Impact of Narasimham and Khusro CommIttee Reports", Indian Journal ~ Agricultural Economics, 47(2), April-June 1992, PP' 255-65.
5 Based on the field data.
6 Madras Institute of Development Tamil Nadu Economv: Performance Delhi, Oxford &. IBH, 1988.
Studies (MIDS), and Issues, New
7 District Credit Plan 1983-85, Coimbatore District, QQ..,... Cit.
8 Yngve Gustafsson, Gunnar Jacks and Lars Y. Nilsoon Bengt Teranger, in their Project Report QD. water Resources and Water Supply in Coimbatore District, Stockholm, Department of Land Improvement and Drainage School, 1970, pointed out that •..• DeepenIng of wells from time to time and the excavation work has been going on since 1920s. During the forty years period from 1928-29 to 1968-69, it was found that the average lowering of water table was to the extent of 16.5 metres. (p. 5) .... The sinking of more new wells, increased densIty of open wells, indiscriminate deepening and installing deep bore wells in an attempt to capture the maximum quantity of ground water resources have come to cause damage to farming in Coimbatore. ThIS IS particularly so in areas devoid of any river course and built up irrigation dams and Coimbatore distrIct has very few natural storage magazines and consequently surface water storage hardly exists
335
(p. 7). Taken from Devarajan 5., Study on Water Resource Management ~ Garden Land AgrIculture, Unpublished Master's thesis, Tamil Nadu Agricultural University, Coimbatore, 1982.
9 Quoted by Ramasamy C and Chinnadurai M, ~ ~
10 Reported in District Credit Plan, C01mb a tore district, ~ cit.
11 Reported in The Hindu, 19-7-1992,
12 For a review of these measures, See 8ad911, M V., QQ.. cit.
13 Hyde F William in a review of a book Informal Cred1t Markets and the New Institutional Econom1cs: The Case of Philippine Agriculture, by Segran10 L Floro and Pan A Yotopoulos, Bowlder, Co, Westve1n Press, 1991, appeared in The Journal of Agr1cul tural Economics Research, 44(1) January 1993, pp. 45-47.
14 Balakrishnan, P Ills there a case for Bank Denationalisation " , The Hindu, Oct 8, 1991, P 17.
15 Katula and Gulati write: Another development in the last few years is the growing pol1tic1satlon of the credit system. With arbitrary announcements and sanctioning of loans by political d1gnitarles, popularly known as IIl oan melas ll
, the beneflclaries treat loans as aid with no obligation to repay. In 1990, Government instituted a scheme to write off agricultural loans to compensate farmers for bad years between 1986-89 which was estimated to cost Government eventually Rs 8,000 crores. Apart from cost to Government, such write offs generate an attitude of non-repayment which, in the long run, can undermine the entire credit structure. Katula and Gulati, ~ Cit., P, 712.
For more detai Is, (i) Gupta, Anll, K and 11"nu Shroff, Rural Banking Learning to Unlearn: An Act10n Research Enquiry, New Delhi, Oxford & IBH, 1990, and, (ii) Singh Surjeet, (Ed), Rural Cred1t: Issues for the Nineties, New Delhi, Oxford & IBH, 1991.
16 P E 0 Evaluation Report on IRDP, 1985, ~ C1t., p. 119,
17 Gadgil M V, ~ cit., P 260.
336
APPENDIX - A
Cost of Cultivation and IncDle froo Agriculture of the Selected Faroers under Minor IrrIgation Sche.e - Block I lIn Rsl
-------Before the loan After the loan
------------ :-Mate- Human Annual Total Gross Net Total Co5t Net Hate- Man Annual Total Gross Net Total cost Net
Farmers rial ~ Ani- Over- Cost. Output IncDle including IncOIle rial ~ ani- over- Cost. output Income including Incco! category! cost oal heads !incOOle I illlputed cost oal heads (inc,",e I illputed schemes labour cost- labour cost
2 3 4 5 b 7 8 9 10 11 12 13 14 15 16 17 -----------------
Marginal Farmers:
1. New Hell 1300 768 150 2218 3S53 1335 3468 as 3193 1292 2024 6509 10700 4279 7965 2823
w 2. Deepening w of well 2046 1318 754 4118 7206 3000 5618 1500 2493 1868 1958 6319 10846 4527 8399 2447 -.J
3. Oil Engine 2324 1070 712 4106 7710 3604 6094 1616 3214 1944 2170 7328 13200 5872 9428 3772 , , )
Small Frmers ,
11
1. N •• Well 2302 1152 602 4056 7746 3690 5596 2150 4321 2361 2257 8939 19065 10126 11639 7426 I 't
2. DeepenIng 'i ,
',~l of •• II 4078 2531 1352 7961 12718 4757 10461 2257 5078 2690 2074 9842 18636 8794 12442 6194
3. Oil EngIne 4600 1857 lasO 8307 13291 4984 10307 2984 7480 2580 2775 12835 23103 10268 15810 7293 r " ----------------------------------------------------------------------------------------------------------------------------.Paid out costs only I,. excluding ioput,d costs of own human labour).
I "
, • 1,...':'
" \~.: .
w w (l)
A P P £ N D I X - B
Cost of CultiYation and Incole fro. Agriculture of the Selected Faroers under Hinor IrrigatIon Sche.e - Block II (in Rs)
Before the loan After the loan ------------------ ---------
oate- Huoan Annual Total Gross Net Total Cost Net Mate- Human Annual Total Gross Net Total cost Net Faroers rial L Ani- OYer- Cost< Output lnc""e including IncDOe rial L ani- Dyer- Cost· output IncOllle including IncOlle categoryl cost mal heads (inCOMe) imputed cost lal heads (inc""e) imputed schemes labour cost- labour cost .---------------------------------------------------------- ----------- ._--------------
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 .---------------------------------------------------
Marginal Fanters
I Deepening of of .ell 1717 471 253 2441 4466 2025 3854 612 2260 742 1006 4008 7615 3607 5492 2123
2 Oil Engine 1860 542 284 2686 4033 1347 3812 221 2580 945 B82 4407 9276 4B69 6397 2879
Saall Faroers
1 Deepening of .ell lB37 980 367 31B4 5967 2783 5634 333 3400 1700 1570 6670 12951 6281 10070 2881
2 OIl Engine 1920 1094 408 3422 6030 2608 5612 418 3697 1940 1080 6717 12150 5433 '1903 2247 -----------------------.----------------------------------------------------.--------------------------------------------------------,Pald out costs only (ie excluding Imputed costs 01 own hUllan labour).
.' , ,. '. :, I. :i
A P PEN 0 I X - C
Financial Viability Analysis - Minor Irrigation Scheme Block-I
Category of farmers/ schemes
B. New Well Scheme
1 Marg inal Farmers
2 Small Farmers
12- Deegening of Well
1 Ma rg ina 1 Farmers
2 Small Farmers
G- Oi I Engine
1 Marg lnal Farmers
2 Sma 11 Farmers
Benefit-cost ratio
at lOX at 20X
1.29 1.22 ( 1 .05 ) (1.01)
1.30 1. 19 ( 1 .04 ) (0.96)
1.55 1.57 ( 1 .09 ) (1.15)
1. 75 1. 73 ( 1 .32 ) ( 1 .29)
1.39 1. 41 (1.15) (1.16)
1.59 1.57 ( 1 .30 ) ( 1 .28 )
Internal Rate of Return (y, )
Without When When imputed impu- subsidy costs ted amount
costs includ inclu ded in ded the cost
20 3 15
12 5 8
50 12 35
> 50 50 > 50
> 50 18 > 50
> 50 > 50 > 50
-------------------------------------------------------Note: Flgures in parentheses are B/C ratios when
imputed costs included in the total cost.
339
A P PEN D I X - D
Financial Viability Analysis - Minor Irrigation Scheme
Block-II
-------------------------------------------------------
Category of farmers/ schemes
Deegening of well
1 Marginal farmers
2 Small Farmers
B Oi I Engine
1 . Marginal Farmers
2 Small Farmers
Benefit-cost ratio
a t lOX at 20%
1.52 1. 51 ( 1 .29 ) (1.27 )
1.55 1.74 (1.10) ( 1 . 25 )
1.62 1. 61 (1.17) (1.17>
1. 70 1.69 ( 1 .23 ) ( 1 .20 )
Internal Rate of Return ( % )
Without ~'h en When imputed impu- subsidy costs ted amount
costs includ inclu ded in ded the cost
40 20 30
) 50 15 50
) 50 50 ) 50
) 50 50 > 50
-------------------------------------------------------Note: Figures in parentheses are BIC ratiOS when
imputed costs included in the total cost.
340
. -.......... ~
.-~
APPENDIX - E
INTERVIEW SCHEDULE
1 • General Particulars
1.1. Name of the beneficiary
1.2 Village
1 .3 Caste
1 .4 Category
II. Housing Condition
2.1. Own/rented/free
2.2. Tiled!Thatched! Tiled and Thatched
2.3 a. Number of rooms
b. Whether ventilated
2.4 Whether electrified
2.5 Cattle shed
341
:
Code
FM FI LM
Small Farmer/Marginal Farmer/Agricultural Labour
Yes!No
Yes!No
Yes!No. If yes, value Rs.
Pucca Rs.-------
Kutcha Rs. ------
III. Details of Melbers of Falily (including HHHI
---------------------------------------------------------------------------------------Education Occup.tion No.of Average
S!. Nale Rehtion- Age Sex ------------ --------- days aonthly No. ship to Pre- Expect- Hain Supple- e.loyed income
the Iffi sent ted .entary --------In In cash kind
IV. Identtfication <The available data frol lRDP Records will be incorporated/cross checkedl
~.I. Details of f .. ily incooe at the ti.e of identification
N ... of the far.er/ labour
S.x No.of days ... ployed (oonthl
Averag. nonthly Income from Total income
Main Other occupa- occupa-tion tion
oth.r sourc.s annual (if anyl incooe
4.2. Process ~ Identification
4.2.1. How did you come to know about the programme?
4.2.2.
Through VLW/Village Accountant/Bank Officer/ T & V/ Any other
Was any household identification?
Yes/No/Do not know.
survey undertaken
.' ~.
for
4.2.3. If no, did you approach anyone to get benefIt under the programme? Yes/No.
342
4.2.4
4.2.5.
If yes, who was contacted?
If no in 4.2.3., who motivated you to undertake benefit of the programme?
'.-i:
4.2.6. Month and year of identification:
4.3. Provision Q..f. Benefits:
4.3.1. Whether any economic benefit plan for your family was prepared: Yes/No/Do not know
4.3.2.
4.3.3.
4.3.4.
4.3.5.
4.3.6.
4.3.7.
4.3.8.
4.3.9.
If yes, did you indicate any choice? Yes/No/Do not know.
Were you consulted for the finalisation of the Plan? Yes/No.
What was the cost envisaged of the scheme?
Date of Application:
Date of Sanction I
Did you receive the benefits as opted by you? Yes/No.
Subsidy and loan amount were given to you purchaslng the milch animal/motor pumpset (A).
for
OR such things were purchased and given to you (B)?
If (B), were these things are reasonably good quality and or in working condition:
1.1. Details of benefits received: ----------------------------------------------------------------------------------------SI. He.
Na., of the N •• e of the fin-scheae ancIaI institu
lioos sancliooed the loan
loan Subsidy Rate of Aoaunt 01 110.01 aoount amount interest instalDent lnstal •• n!
------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
v. Beneficiary's access to other facilities
5 • 1 • Whether the covered the Yes/No.
343
total amount of assistance recelved entire cost of the scheme/proJect?
5.2.
5.3.
5.4.
5.5.
a.
b.
c.
d.
e .
1.
g.
5.6.
If no, how did you manage the balance amount?
Did you have to spend some money in obtaining benefit or in expediting it? Yes/No
If yes, give details:
the
Do you think that the existing infrastructure facilities in respect of the following are adequate?
Implementing agency Yes/No/Cannot say
Financi al agency Yes/No/Cannot say
Availability of benefit/ scheme Yes/No/Cannot say
Availability of inputs Yes/No/Cannot say
Marketing facility Yes/No/Cannot say
Veterinary services Yes/No/Cannot say
Electricity supply Yes/No/Cannot say
If no, in any of the items in 5.5., facilities are required for smooth your enterprise?
what additional functioning of
VI. Utilisation of the loan/investments made (minor irrigation)
51. Name of the No. project
prOVided
Vear Name of the bank
(investment In Rs.)
Investment made in Rs. Total ----------------------------- 5+6+7+8 Bank Govt. Benefi- Private Loan sub- ciary's loan
sidy contri- <If any) but ion
-----------------------------------------------------------------------
-----------------------------------------------------------------------
344
V I I • Impact of the Scheme
a. Details of the 'before' benefit:
yield and
of different crops sown after the receipt of the
-------------------------------------------------------------Year For area benefited by the scheme
---------------------------------------------Name of Area in Cost of the crop acres cultivation
Yield Value Net income
-------------------------------------------------------------Reference Year
Current Year -------------------------------------------------------------
b. Income and Employment:
OCCUPATION
PRIMARY SECONDARY
Duration of Employment
hid dim mid
Earnings Duration of Earnings Employment
pdlpmlpa hid dim m/y pdlpmlpa -------------------------------------------------------------
Before
After -------------------------------------------------------------
c . Impact of the scheme on the following aspects: -------------------------------------------------------------S 1 • No.
1.
2.
3.
Changes in Before After ---------------------------------------------------------
Cropping pattern
Cropping intensity
Asset position
4. Any other (specify) ------------------ -------------------------------
~----------
345
VI. Utilisation of the loan/working of th. sch ••• IMilch anioall
lCost in Rs.1 -----------------------------------------------------F •• d fincluding Veterinary transport costl "p.ns.s
Fodder Coocen-trates
Cost of cattle shed
Labour exp.ns.s other "pens.s
Hired
lotal working cost
-------------------------------------------------------------
----------------------------------------------------------------------------------------
7,1, locoo. fro. the sche.e
---------------------------------------------------------
Av.rage i)Jaoti ty Price of No.of Annual Agency to Incooe fro. Incoo. froo .,Ik y"ld of oi I k per Ii t.r o,lk days incoo. which by products 5.11 ing (p.r dayl sold 0' I k ,n a year IRs. I supplied -------
(p.r dayl Calf Cow dung ------------------------------ ---------
~_.:s --,
7,2, Impact of the schemelloan ('Before' and 'After')
a, Income and Employment: -------------------------------------------------------------
OCCUPATION ----------------------------------------------
PRIMARY SECONDARY ----------------------Duration of Earnings Duration of Earnings Employment Employment ----------- -------- ----------- ---------hid dim mid pdlpmlpa hid dim m/y pdlpmlpa
-------------------------------------------------------------Before
After (at present)
----------------------------------------------------------
346
.. ;....:-.-
b. Asset position and other conditions
S 1 • No. Changes in Before After
1. Asset position
2. Indebtedness (other than benefit scheme loan)
3. Any other (specify)
V I I I • Repayment of the Loan
8 • 1 • Are you satisfied with the terms and conditions of the loan? Yes/NQ/cannot say
8.2.
8.3.
8.4.
8.5 .
8.6.
8.7.
I X •
If no, why?
How much loan have you repaid so far?
a. Have you repaid the loan out of the income derived from the scheme? Yes/No
b. If yes, wholly or partly? Wholly/partly
Are there any overdues Yes/No/Cannot say
If yes, how much?
Reasons for default
Farming operations and asset position of beneficiary (Small/marginal farmers only)
347
the
-.-::.-' . ":.,_ ... : '.:'. ""-.~"" ".~ ..... -
9. 1 . Land particulars:
--------------------------------------------------------Area Owned Leased Leased Gross
(in acres) in out value (Rs. )
--------------------------------------------------------
1. I r rig a t ed 1 and
2. Dry land
3. Garden land
4. Current fallow
--------------------------------------------------------
(iteos q.2 and Q.3 - Other than the area benefited by the .inor irrigation scheme in the case of Ilnor IrrigatIon beneficiaries)
Q.2. Cropping pattern (for one agricultural year) and cost of cui livation
---------------------------------------------------------------------Hue of the crop
Ar.. Whether Cost of cultivation Hunn labour Bullock In HYV or ----------------------- charges labour acres Inferior land Seeds Hanure Fertilizer ------- charges
pre- Qty Value Qty. Value Qty. Value Own Hired -------paration
Own Hi red
E!ec- Other tri- char-city! gos oil charge
--
Total
-----------------------------------------------------..",----------
9.3. Production and Sale particulars -----------------------------------------------------------------------------SI. No.
Item Production Sales
Quantity Value Quantity Value
To "'hom the sale is made
Transport and other charges
------------------------------------------------------------------------------
-------------------------------------------------------------------------
348
I X •
9. 1 .
a.
b.
working conditions and beneficiary (Agricultural
Working condition
Nature of work
Working hours per day
asset position of labourer's family)
the
c. Wage per day/month Male --- Female---- Child ---
d. Wage in kind/cash
e. Distance to the working p I ace
f. Did you receive any advance from the employer:
g. If yes, how much (month/year)
h. With any conditions (specify)
9.2/9.4. LIve stock and Birds
:
SI. No.
Items No. Value Cost of feed and maintenance (Rs.)
Gross income <Rs. )
Net Income (Rs. )
--------------------------------------------------------------------I. Bullocks
2. Cow (Milch)
3. Cows (Dry)
4. Buffaloes (Milch)
5. Buffaloes <Dry)
6. a. He-calf b. She-cal f
7. Sheep
8. Goats
9. poultry birds
10. Other'S -------------------------------
349
-------------------------------------
9.3/9.5. Othep assets ----------------------------------------------------------------SI. Items No. Value Cost of Gposs Net No. mainte- income income
n anc e fpom hiring
----------------------------------------------------------------1. Bullock cart 2. Plough 3. Powep/hand sprayer 4. Others ----------------------------------------------------------------
9.1/9.6 Did you possess: No. Value
1. Cycle 2. RatIo/Transistor 3. Watch/Time piece I. Furniture iteas 5. Others
X. Loan particulars (other than lROP)
Purpose of Source Year Aloount Inte- Subsi- Sub- Due Over Teras of loan Bank! rest dising sidy date due repay.ent
PAC rate agency a.t. ",!, -------Prlyate schem.e Perio- In5t.l-
dicity .ent
-----------------------------------------------------
I. To buy far. aachinery
2. Mllch ani .. ls
3. Raw .a\erials
I. Fara/crop inyestoent
5. My other (productive)
6. Marriage ~ other ( e rflDOll i es
7. Consuoption
8. My other ----------------------------------------------------------------
350
10.1. Jewel loans
a. Do you have any gold/jewels Yes/No
b . If yes, how many grams
c . Did you have the hab i t of taking jewel loans? Yes/No
d. If yes, where from Bank/Private
e . If private, why not from bank Reasons
10.2. Banking habits
a. Distance of the bank branch/PAC (in kms)
b. Do you have any account in
Amount in Rs. Interest Rate
1. Banks
2. Post Office
3. Relatives
4. Chit Funds
5. Others -------------------------------------------------------------
XI. Other particulars
11.1. Credit camp:
a. Are you aware of the credit camps? Yes/No
b. If yes, did you attend it Yes/No
c • If yes, how many times:
d • Where it was held (distance from his village):
351
11.2. Training ~ Visit II k ~ System
a. Have you heard of T & V programme: Yes/No
b. If yes, have you benefited out of that: YeslNo
c. If yes, in what way (remarks)
d. Have you undergone any Farmer's Training Programme: Yes/No.
11.3. Membership
a. Whether you or any of your family member 1S a member of
a. Co-op~rative credit society
b. Political party
c. Caste/Farmers/Workers Association
b. Nature of Membership:
XII. Opinion about the IRD programmes
12.1. Difficulties he e~perienced in getting the loan:
12.2. What are his suggestions to better the implementation of the programme:
352
BIBLIOGRAPHY
AbdI, Ali Issa, Commercial Banks and Economic Development, New York, Praeger, 1977.
Adams D.W. and Croward E.W., Small Farmer Development StrategIes ~ Seminar Report, New York, Agricultural Development Council, Inc., 1972.
------- Douglas H J.D.,Undermining credit , Boulder,
Graham and Von Rural Development with Colorado, Westview Prss,
PIschke cheap
1984.
Adelman, Irma, and Morris, Cynthia, SOCiety, PolItics and Economic Development: ~ QuantItative Approach, BaltImore, John Hopkins Press, 1967.
Adhvaryu, J .H., Financial Intermediation and Development, The Indian Economic Journal, Jan-March 1979, pp 63-88.
Rural 26(3)
Alyasami U, and Bohle H G, "Market Access as Constralnt on Marginal and Small Farmers", Economlc and Political Weekly, Revlew of Agriculture, March 1981, pp A-29-A 36.
Analyst, "Banks: Myth of Branches ll
, Economic and May 1, 1993, pp. 853-4.
Non-Viabillty of PolitIcal Weekly,
Rural 28 ( 181 ,
Anandteerth KI ttur and Basanna H, "A Revlew of MIcro-StudIes on Defaults of Institutional to AgrIculture", Land Bank Journal, 31(1), 1992, pp 53-55.
Some Loans Sept
Arumugam, M, ~ Study of Farm Level CredIt Management iQ Thondamuthur Block, Coimbatore DistrIct, TamIl Nadu, Unpublished Doctoral Dissertation, UniverSity of Madras, July 1983.
ArVlnd Virmani, The Nature of Credit Markets ~
Developing CountrIes, World Bank Staff Working Papers, Number 524, Washington, World Bank, 1982.
353
Asokan S R and Singh, Gurdev, Institutional Rural India: Eficiency and Efficacy, Oxford & IBH, 1988.
Finance ill New Delhi,
Avadhani, V.A., "Rural Retrogression and Instl tutional Finance", Economic and Political Weekly, 1·~(26)
June 30, 1979, pp A75-84.
AZiZ, Abdul, Research on IRDP: A Surv&y of Literature, (Paper presented at a National Seminar ~ People and Poverty, organised by The Gandhigram Rural Institute, Gandhlgram, Tamil Nadu on Sept 2-4, 1985.
Bagchee, Sandeep, "Poverty Allevi ation Programms in Seventh Plan", Economic and Political Weekly, 22(4) January 24, 1987, pp 139-148.
Bardhan, Kalpana, "Rural Employment, Wages and Labour Markets in India - A Survey of Research", Economic and Political Weekly, 12(27), July 2, 1977, pp. 1062-74.
Bardhan K Pranab, Land, Labour and Essays ~ Development Economics, UniversIty Press, 1989.
Rural Poverty New Delhi, Oxford
Bathrick David D,Agricultural Credit for Development: PoliCies and Practices, WestvIew Press, Inc., 1981.
Small Colorado,
Baum W C, "Agricultural Credit Finance and Development, 37.
and th e 13(2) ,
Small Farmer ll,
1976, pp 14-16 &
Baun, E.L., Diesslin M C and Earl 0 Heady (Eds), Capital and Credit Needs ~ ~ Changing Agriculture, Ames, Iowa, USA, Iowa State UniverSity Press, 1961.
Bayliss-Smith, Tim, P, and Wanmali Sudh,r (Ed), Understanding Green Revolutions: Agrarian Change and Development Planning ~ South Asia; Essays LQ honour of ~ ~ Farmer, Cambridge, Cambridge University Press, 1984.
Beckford, George Development Development, 2
L , and (6 )
"Comparative Rural Under-development",
June 1974, pp 35-45.
Systems, World
Belshaw, Horace, Agricultural Credit ill Economically Underdeveloped countrIes, Agricultural Studies, No.46, Rome, FAD, 1959.
354
Bhaduri, Amit, "Class Relations and the Pattern of Accumulation in an AgrarIan Economy", CambrIdge Journal of Economics, 5(1), March 1981, pp 33-46.
-------, ~ Economic Structure of Backward Agriculture, New Delhi, MacMillan, 1984.
Bh a I I a G. S . , Small among 1983.
and Chadha G K, Green RevolutIon and the Peasant: ~ Study of Income Distribution Punjab Cultivators, New Delhi, Concept,
Bhalla, Sheila, Agricultural Growth -Role of Institutional and Intrastructural Factors,
'" 46), Nov Economic and Poll tical Weekly, 12 (45 5-12, 1977, pp 1898-1905.
Bhatt V V, "On Financial Evolution", World pp. 281-92.
InnovatIons and CredIt Development, 16(2) Feb
Market 1988,
Binswanger, Hans P, Vernan W, Ruttan et aI, Induced Innovation, Technology, InstitutIons and Development, Baltimore'" London, The Johns HopkIns UnlversityPress, 1978.
8rara, The Polltlcal Economv of Rural Development, New Delhi, Allled, 1983.
Cameron, R, Banklng Industriallsatlon: Hlstory, 1969.
~ the Early Stages Qi ~ Study ~ Comparatlve Economlc
Cameron, Rando (Ed), Some Lessons
Banklno and Economlc Development: Qi History,New York, Oxford
Unlversity Press, 1972.
Chambers, Robert, Rural Development: Putting the Last FIrst, London, Longman, 1983.
Christopher, John Baker, An Indian Rural Economy 1880-1955: The Tamil Nadu Countryside, Bombay, Oxford, 1984.
Dandekar, V.M. and Wadia, F .K., "Development of Institut10nal Finance for Agriculture 1n Indla", Journal of Indian School Politlcal Economy, 1(2), July-December 1989, pp. 167-211.
Dantwala, M.L. "Instltutional Credit in SubsistenCe Agriculture", Artha-Vikas, Jan 1968, 4(1) pp 1-11.
355
---------, "Technology, Growth and Equity in Agriculture", in Mellor J Wand Desai G M (Eds), Agricultural Change and Rural Poverty' Variations of i!. Theme ~ Dharm Narain, Baltimore, Johns Hopkins, 1985.
Desai, B M., Viability ~ Eguity Objectives of Institutional Credit for Agriculture, Ahmedabad, 11M, Jan 1978.
Desai 0 K, "Institutional Credit Requirements Agricultural Production 2000 ADI", Journal of Agricultural Economics, 53(3) Sept. 1988, pp. 326-55.
for Indian July-
Desai SSM, Rural Banking ~ India, Publishing House, 1983.
Bombay, Himalaya
Desai, Vasant, Fundamentals of Systems Approach, Bombay, House, 1991.
Rural Development: a Himalaya Publishing
Deshpande, S.H., "Transforming Traditional Agriculture:A Delayed Critique of Theodore Schultz," Economic and Political Weekly, 12(53) Dec.31, 1977, pp A-127-132.
Dhawan, B.D., "Externalities of New Ground Water Technology on Small Farmers," Indian Journal Q.L Agricultural Economics, 30(3), July-Sept, 1975, pp. 191-6.
-------- Irrigation Impact QQ Instability ~ Farm Output: a Case Study Q.L Tamil Nadu State, New Delhi, Institute of Economic Growth, Mimeograph, August 1983.
Donald, Gordon, CountrIes, 1976.
Credit for Small Farms ~ DeveloPing Boulder, Colorado, Westview Press,
Donald C. Taylor, E.i!.I:m. Managemen: Its role ~ Alleviating Institutional Constraints Facing Asian Small Farms, The Agricultural Development Council Inc., No.25, Sept 1980.
Epstein T.S., Economic Development and SOCial Change ~ South India, Manchester University Press, 1962.
--------, South India: Yesterday, Today and Tomorrow, London, Mac Millan, 1973.
356
Farmer B.H.(Ed), Green Revolution? Technology and Change ~ New Rice Growing Areas of Tamil Nadul and SrI Lanka, London, MacMillan, 1977.
Food and Agricultural Organisation (FAD), New Approach to Agricultural Credit, Rome, FAD, 1964.
--------, Credit for Agriculture ~ the World, Rome, FAD, 1975.
Developing
--------, Harnessing the Financial SYstem iQ Support of Rural Development, Proceedings of the Seminar, Rome, FAD, 1981.
GadgII, M.V., "Agricultural Credit in India: A Review of Performance and Policies," Indian Journal of AgrIcultural EconomIcs, 41 (3) July-Sept.1986.
-------- "Future of Institutional Agricultural CredIt In IndIa: Likely Impact of Narasimham and Khusro Committee Rports", IndIan Journal of AgrIcultural EconomIcs, 47(2), Aprll-June 1992, pp 255-65.
Gebert Rita, "Poverty Alleviation and Village PolItICS In TamIl Nadu: Whose Interests Flrst?", Economlc and Polltical Weekly, 24(4) January 28, 1989, pp. 197-202.
George P .5. and Srivatsava U.K., "InstItutIonal FInance for Dairy Development," IndIan Journal 9.i.. Agrlcultural EconomIcs, 30(3), July-Sept 1975, pp. 90-96.
Gerschenkron, Ale~ander, Economic Backwardness ~
HIstorIcal Perspective: ~ Book 9.i.. Essays, Harward Unlversity Press, 1962.
Ghate P. B., "IrrIgation for Very Small Farmers: Appropriate Technology or ApproprIate Organlsatlon", Economic and Polit,cal Weekly, 15(52), Dec 27, 1980, pp A 161-72.
GittInger, J.Price, Economic AnalYSIS of AgrIcultural ProJects, Baltlmore, London, The Johns Hopkins University Press, 1982.
GoldsmIth, R.W., Financial Structure and Development, New Haven, Yale University Press, 1969.
Government of India, Mlnlstry of Rural Reconstructlon, Manual on llilli:., Krishi Bhavan, New DelhI, 1980.
357
--------, Planning Commission, Programme Evaluation Organisation (PEO), "Evaluation Report on Integrated Rural Development Programme", New Delhi, Planning Commission, May 1985.
Griffin, Keith, Change, New 1979.
The Political Economy of Delhi, Macmillan, Second
Gunasekaran S., Small Farmers and Institutional New Delhi, Ashish, 1985.
B.9..La r 1 an Edition,
Credit,
Gupta, Anll,K and Manu Shroff, Rural Banking ~ Learnlng ~ Unlearn: An Action Research EnqUlry, New Delhi, Oxford g, IBH, 1990.
Gupta, Malablka Das,"A Note on Griffin's View,; on Innovation and the Small Farmers," The Indian Economlc Journal, 26(4 and 5) April-June, 1979, pp. 67-73.
Gurley, J.G. and Shaw, Brookings,
E. S., Money 1960.
Theory Finance,
Hans-Dletie P.oth,"Moneylenders' Management Agreements: Report on a Case Study in Economic and Political Weekly, 14(28), 1979, pp. 1160-70.
of Loan Dhanbad, " July 14,
Hayaml Y and Ruttan V, Agricultural Development _ An Internationaal Perspective. Johns Hopklns, 1971.
Hayer, Judi th, Attemptlng to Reach the SFDA ~ Kanur Village, Madras, Paper, 1981.
HiCks, Ursula Control,
K, Development Oxford, 1965.
Finance:
Rural Poor: The MIDS, Worklng
Planning
Hlrway, Indira, "Garibi Hatao: Can IRDP Do It", Economlc and Politlcal Weekly, 20(13), March 30, 1985, pp561-64.
Hooda 1.5., "Changing Thoughts and Programmes of Rural Development in India u , The Asian Economlc Revlew, 34(2), August, 1992, pp 418-435.
Hugh, Patrick, Growth in Development pp 101-114.
"Financial Development and Underdeveloped Countries", and Cultural Change, (1462),
358
EconomiC EconomiC
Jan 1966,
.:; ._'"
Institute of Financial Management and Research IIFMR), !IAn Economic Assessment of Poverty Eradlcatlon and Rural Unemplpyment Programme and their Prospects," Mimeo, Madras, IFMR, Apri I, 1984.
International Labour Organisation Poverty: Asia's MaJor Challenge, Employment Programme, 1986.
IILO), ~htlnQ
New Delhi, ASian
Jacob Kurien, "The Repayment Capacity of Small Farmers", Economic 8ffairs, 30(2), June 1985, pp 86-97.
Jakhade, V.M. and Gadgil, M.V., "Production and Repayment Capacity Oriented Lending for Farm Investment, RBI Bulletin, Jan 1970, pp 56-77.
Jodha, N.S., "Special Programmes for the Rural Poor: The Constraining Framework", Economic and Political Weekly, 8(13), March 31,1973, pp 633-9.
Johl, 5.5., have
IIGains been
of the Green Revolution: How they shared in PunJab", Journal 9..i.
178-Development 189.
Studies, 11(3), Aprll 1975, pp
Joshi P.C., "Poverty, Land Hunger and Emerglng Class Conflicts In Rural India", In Steve Jones, JOShi P .C. and Miguel 11urmis (Eds), Rural Poverty and Agrarian Reform, New Delhi, Allled, 1982.
-------, MarXism and Social Revolution ~ Indla and Other Essays, New Delhi, Patriot, 1986.
Kahlon A,S. and Sing Karan, Managing Agricultural F,nance:Theory and Practice, New Delhi, 1984.
Kale, Anil and Mali, Namdeo,"Problems Faced Farmers and Agricultural Labourers In Loans", PraJnan, 13(4) Oct-Dec. 1984, pp
Allied,
by Small obtaining 443-447.
Katula, Rajni and Gulati, Ashok, "Institutional Credit to Agricultue: Issues Related to Interest and Defaul t Subsidy", Journal of Indl an School of Political Economy, 4(4) Oct-Dec. 1992, pp. 701-29.
Keynes, J.M., The General Theory 9..i. Employment, and Money, Brace and World, Inc., 1936.
Krishna, Raj, Rural Unemploylment ~ ~ Survey 9..i. and Estimates for India, World Bank Staff Papers, No.234, April 1976.
359
Interest
Concepts \.Jorklng
-------, "Small Farmer Development," Economic and Pol itical Weekly, 14 (21), May 26, 1979, PP 913-8.
Kurien C.T., "Rural Poverty in Tamil Nadu" , in Poverty and Landless ~ Rural Asia, Geneva, InternatIonal Labour Organisation, 1977.
-------, Poverty, Planning and Social New Delhi, Allied, 1978.
Transformation,
Kuznets, Simon, Modern Economic and Spread, New Haven, 1966.
Growth: Rate, Structure Yale UnIversIty Press,
Kurulkar R.P., Agricultural Finance ~ ~
Region, Bombay, Himalaya, 1983. Backward
Lakshmanan, T.R., "A System Model of Rural Development", World Development, 10 (10) 1982, pp 885-98.
Lal, Deepak, "Wells and Welfare", ParIS, Development Centre of the Organisation for EconomIc Cooperation and Development (OECD), 1972.
Laxminarayan, H. Labourers,1I October 22,
"Changing Conditions of AgrIcultural Economic and Political Weekly, 12 (43) 1977, pp 1817-20.
LewIs Arthur W, The Theory of Economic Growth, New York, Harper and Row, 1970.
LIpton, Michel, "Strategy for Agriculture: Urban BIas and Rural Planning", in Streeton, Paul and Lipton, Michel, (Eds), The Crisis of IndIan Planning, Oxford University Press, 1968, ELSS Edition, 1972, pp 83-147.
-------, "Agricultural Finance and Rural Credit In Countries", World Development, 4 (7), pp. 543-53.
Poor 1976,
-------, ~ Poor People Stay Poor ~ Urban World Development, London, Temple Smith,
Bias 1977.
Madras Institute of Development Nadu Economy ~ Performance Oxford & ISH, 1988.
Studies (141 Ds) ,
and Issues, New TamIl
De I hi,
Mahbub UI Haq, "The Curtain ~ Poverty: ChOIces for the ThIrd World", New Delhi, Oxford and IBH, 1978.
360
McKinnan, R.J., Development, Institution,
Money and Capi tal ill Washington, The
1973.
Economlc Brookings
Mel ichar, Emanuel, "Financing Supply of Farm Capital Journal of Agricultural 1973, pp 313-25.
Agriculture: Demand and and Credit", American
EconomIcs, 55 (2), May
Mencher, J.P., Agriculture and Social Structure in Tamil Nadu, New Delhi, Allied, 1978.
Mishra, G.P., "Distributional Effects of Rural Development Strategies: A Case Study", Economic and PolitIcal Weekly, 14 (39) September 29, 1979, pp A.86-92.
Mishra, S.P., "Developing Dairy Entrepreneurs", 10(2) June 1983, pp 63-70.
SEDME,
Mohideen, K.S.S. Agricul tural Q.f. Coimbatore
Uduman, Institutional Credit and Development: ~ Study Q.f. Annur Block district, New Delhi, Mittal, 1991.
Mujumdar, N.A., "Rapporteur's Report Credi t - Rural," Indian Journal Economics, 53(3), July-Sept 1988.
on of
lnstitutional Agrlcul tural
Mukherjl, Shakti, "A Few thoughts on Financial Indla",
Oct-Dec. IntermedIation and Rural Development in The IndIan Economic Journal, 26(2), 1978, pp 25-39.
Murray, W.G., Agricultural Finance, Practice Q.f. Farm Credit, Ames, State College Press, 1949.
Principles Iowa, USA,
Myrdal, G. Asian Drama, New York, Pantheon, 1968.
and Iowa
-------, Economic Theory and Underdeveloped Regions, London, Melhuen, 1972.
Nanjundappa, D.M., Development with SOCial Justice, New Delhi, Oxford & ISH, 1976.
-------, "Rural-Urban Conundrum in Indian Planning", Indian Economic Journal, April-June, 1982, pp 1-18.
-------, "Rural Bias for Development 'l In Brahmananda, P.R., Narayan S.K., and Kalappa (Eds), of Rural Development ~ IndIa, Bombay, 1987, pp 100-121.
361
Dimenslons Himalaya,
Narasimham, M., "Some Reflections on the Indian Scene", Pigmy Economic Review, 29 (7), 1984.
Banking February
Natlonal Bank for Agriculture and Rural (NABARD), "Study Q.L Implementatlon Mlmeo, Bombay, NABARD, 1985.
Development of IPDP" - -~
Nurkse, Ragnar, Problems of Underdeveloped countries, 1953.
CaPItal Formation ~
Oxford, Basll Blackwell,
Padmanabhan, K.P., Rural Credit: Lessons for Rural Bankers and Policy Makers, London, Intermediate Technology Publications, 1988.
Pal, S.P., Contribution Q.L Irrigation to Agricultural Froduction and Productlvity. New Delhi, NCAER, 1985.
Pandey, U.K. and Muralidharan, M.A., "An Applicatlon of Discrlmlnant Function in Agricul tural Flnance", Indlan Journal of Agricultural Economlcs, (32) 1977, pp 41-51.
Parthasarathy, Sections,
G, Green Revolution Bombay, Theckar & Co.
and the Pvt Ltd.,
Weaker 1971.
-------, Agricultural Development and Small Farmers: ~
Study Q.L Andhra Pradesh, New DeIhl, Vikas, 1971.
Patel, K.V., and Khankhoje, "Rural Banklng: BaSIC Issues and Scope for Restructuring", Pralnan, 21(4):January-March 1993, pp 455-74.
Prasad, Kamta, "Financial Intermediaries and Devedopment" (Rapporteur's Report), The EconomiC Journal 26 (2), Oct-Dec 1978, pp 304.
Rural I nd 1 an
287-
RaJu, V.T., "Impact of New Agricultural Technology on Farm Income Distribution ln West Godavarl Dlstrict, India", Amerlcan Journal Q.L AQrlcultural EconomiCS, 58(2), May 1976, pp. 346-50.
Ramasamy C, and Chinnadurai M., "Agricultural Economy: Problems and Prospects", (Paper presented at a Semlnar on Economlc Development of COlmbatore Dlstrict, held at Bharathiar Unlverslty, COlmbatore on 22 March, 1993).
362
Rangarajan C, Innovations ~ Banking, N~w D~lhi,
8, I BH, 1982. O><ford
Rao, Hanumantha, C.H., Technological Change and Distribution of Gains in Indian Agriculture, New Delhi, MacMillan, 1975.
------- "Farm Size and Credit Policy", in Tokhi, M.R.
Rao,
, and New
Sharma, D.P. (Eds), Rural Banking ~ Indla, I Delhi, O><ford, 1975.
Mohana, J., "Interest Rates in Backward ture.", Cambridge Journal of Economics, pp 159-67.
Agricul-1980, 4,
Rao, V.G. and Paramjit Malya, Agricultural Flnance ~ Commercial Banks, New Delhi, Ashlsh 1980.
Rao, V.K.R.V., "Some Neglected Factors In Integrated Rural Development", Southern Economlst, 15 (20), 1977, pp 9-14.
Rao, V.M, "Rural Development Personnel: Locatlon, Status, and Development Characteristlcs", Economlc and Polltical Weekly, 17 (42), October 16, 1982, pp 1691-6.
Rath, Ni lakantha, "Institutional Credit for Agriculture ln India", Journal of Indian School 9..i Political Economy, 1(2) July-Dec. 1989, pp 239-67.
Raut, I<.C. and Singh,S., "Economics of Milk Productlon by Landless Cattle Owners and Farmers of Small, Medium and Large Holdings", Indlan Journal of Anlmal Sciences, 43 (7), 1972, pp 567-72.
Raut,I<.C., Singh and Rastogi, R.L., "Studles on
Ray,
Economlcs of Milk Production in Dlfferent Categories of Rural Households", Indl an Journal 9..i Animal Sciences, 47 (1), 1977, pp 1-3.
Amal, "Organisational Problems of Small Development Administration", Economic Political Weekly, 15(51 & 52), Dec. 22-29, pp. 161-4.
Fa.rmer and
1979,
Reserve Bank of India, All India Rural Credlt ReVIew Committee Report, Bombay, RBI, 1969.
-------, Report Cooperative 1974.
of the Cred it
Study Team Institutlons,
363
On Overdues ot Bombay, RBI,
-------, Loan Policy and Procedural Arrangement ln Relation to the Institutional Credit System ln India, Bombay, RBI, 1976.
-------, Indebtedness Avallabillty of RBI, 1977.
of Rural Institutional
Households and Flnance, Bombay,
-------, Agricultural Credit Schemes of Commercial Banks - Report of the Expert Group, Bombay, RBI, 1978.
-------, Report of the Committee to Review Arrangements for Instltutional CredIt for AgrIculture and Rural Development (CRAFICARD), Bombay, RBI, Jan.1981.
------- A Revlew of the Agrlcultural Credit System ln India: Report of Agricultural Credit Revlew Commlttee, Bombay, RBI, 1989.
Robert 0 Stevens (Ed), "Trad i t ion and Farm Agrlculture Economlc Afrlca, and Latin America, Unlverslty Press, 1977.
Dynamism ill Studles !ll The Iowa
Small As 1 a ,_ State
Robert F Emery, The Financial InstItutIons of South-east 8S1 a Ii Country-by-Country Study, Ne" York, Praeger Publlshers, 1970.
Ronald Tinnermler and Chris Credlt. Inc. New York, Councll, March 1973.
Oowswell, Small Farmer Agrlcultural Development
Rostow, W.W., The Stag~ of Economlc Gro",th, Cambrldge UnIversity Press, 1971.
London,
Rudra, Ashok "Organisatlon of Agriculture for Rur'al Development: The Indtan Case" tn Oharam and Others (Ed), Agrarian Systems and Rural Development, London, MacMlllan 1979, pp 72-112,
Rudra, Ashok and Bardhan ,Pranab, "An Analysls ot Vlliage Survey Data in East Indla", Economlc an>! Pollttcal Weekly, 13(6) Feb 1978, pp 367-84.
Schultz, T.W., Transforming Tradltional Yale, 1961.
-------, Economic Growth and Agriculture, MacGrow-Hlll Book Co., 1968.
Agriculture,
NeVJ '{or'k,
Schumpeter, J .A., The Theory of Economlc Development, Cambrldge, Mass: Harward UniverSIty PreSs, 1949.
364
'-=-~-- .. _--
Shah, C.H., "Small Farmer: Policy and Problems" Economlc and Polltlcal Weeklyl, 13 (42), October 21, )978, pp 1771-75.
Shah, Edward, Flnancial Deepening ~ EconomlC Development, London, 1973.
Oxford UnIverslty Press,
Shah, S.M., Rural Development PlannIng and Reforms, Nel" Delhi, Abhlnav, 1977.
Shete, NaBa, "Experience of Agricultural Loan RecoverIES in Some DevelopIng Countries: Lessons for Indlan CommercIal Banks", PraJnan, 21(1), Aprll-June 1992 pp 89-97.
SIngh, Chandra Under the 1989.
Prakash, Poverty Allevlation Programmes Plans, New DelhI, Indus Publlshing Co.,
SIngh, Inderjit, Small Farmers and the Landless ill South ASla. World Bank Staff Working Paper, No. 320, Feb 1979.
SIngh, J.P., AgrIcultural F,nance: Theory and PractIce, New Delhi, Ashlsh PublIshIng House, 1988.
Slngh, Katar., "The Impact of New AgrIcultural Technology on Farm Income Dlstribution In Allgarh Dlstrlct of U.P.," Indlan Journal ot AgrIcultural EconomIcs, 28(2), AprIl-June, 1973, pp 1-11.
SIngh, Katar, Flood I Instltute 1982.
and II of
Das, Mukunda, Impact of OperatIon the village Level, Research Report, Rural Management (IRMA), Anand, July
SIngh, SurJeet (Ed), Rural Cred It: Issues for the Nlnetles, New DelhI, Oxford & IBH, 1991.
Sivakumar, S.S., "Aspects of AgrarIan Economy In TamIl Nadu: A Study of Two Vlliages", Economlc ""0 PolitIcal Weekly, 13 <18, 19 & 20), May 6, 13 &.
20, 1978.
SrInIvasan, T.N. and Bardhan, P.K., Poverty and Income D,strlbut,on ill India, Calcutta, Statlstlcaj PublIshIng Society, 1974.
Subbarao, K, Agricultural Marketing DeIhl, Indian Councll of SOCIal ( I CSSR ), 1989.
365
and Credit, Ih:'\>.'
SClence Research,
.. :: '--':--. -. -;'.' .-~-- < - .. -~. ~ ~: "!....
Subrahmanya, K N, (Ed), Trends and PrClgress ct BankIng .!..!l India, New Delhi, Deep & Deep, 1986.
Tendulkar, D. Suresh, IIRural Institutiona~. Credit and Rural Development", Indian EconomIc Rev>ew, 18(1), Jan-June 1983, pp 101-37.
Tendulkar, D. and Sundaram K, "IRDP in IndIa" SOCIal Action, 35 (1), Jan-March 1985, pp 1-25.
Thorner, Daniel, Agricultural CClClperatlves 1-"- Ind, a, B. FIeld Report, BClmbay, Asia PublIshIng House, 1964.
TodarCl, Michel, World, New
P, EconomIc Development York, Longman, 19B 1.
Ih I rd
Vanltha RattI and Sharda, N.K., Rural Poor,!t Agrlcultural (2), May 1992, pp 117-9.
"Impact Clf IRDP on Situatlon ~ IndIa,
the 5/
llAssistance to Expand AgrIcultural Vernon ~J.Ruttan,
Productlon" , pp.39-63.
World Deve lopment, lq (1), 1986,
VIswanat:,an, S.P., "A Study of the Lead Bank Scheme WIth Special Reference to Coimbatore Dlstl'lct", Unpublished doctoral dIssertatIon, Bharathlar Unlversl ty, 1988.
Von Pischke, J.D., Dale .W. Adams, and Gordon Donald (Ed), Rural F,nanCIal Markets 1-"- DevelopIng CountrIes::. Their Use and Abuse," BaltImore, Johns Hopk Ins, 1983.
Wall, M.M.K., "Institutional Cred,t for the Rural Poor", The Indian Journal ct PublIC AdmInIstratIon, 26 (3), July-Sept 1980, pp 710-24.
World Bank, Rural Development: SectClr 1975. WashIngton D.C., World Bank,
-------, AgrIcultural Cred; t: Sec tor WashIngton D.C., World Bank, 1975.
Po I ICY Paper,
POlICY PaD e r .
------- , Adoption of AgrIcultural De vel op I,}Sl Coun t r I e s: B. Su r v e Y , WorkIng Papers, No.542, 1982.
InnovatIon !S~
World Bank St~ir
Yang, W.Y., Methods of Farm Management Invest lqat lO:-lS.
Rome, FAO, 1968.
366