Effect of Liberalization on Institutional Agricultural Credit Flow and its Relationship with Average Cost of Cultivation in Indian Agriculture

This paper has examined (i) the nature and extent of inter-state disparities in per hectare flow of short-term institutional credit to agriculture, and (ii) its relationship with average cost of cultivation across states. It has covered all the six regions of the country comprising seventeen agriculturally most important states having about 96 per cent agricultural land in the country. It has revealed that inter-regional disparities in per hectare flow of institutional credit as measured through coefficient of variation (CV) had increased during the pre-liberalization period between 1980-81 and 1990-91. During the post-liberalization era (1991-92 to 2001-02), the inter-regional disparities have reduced. The per hectare institutional credit flow has shown that in most of the states across the country the coverage has increased though in different degrees during the post-liberalization stage over the pre-liberalization period. But, the coverage has still remained very low (below 20 per cent of cost of cultivation), except in the four states of southern region and Punjab and Himachal Pradesh in the northern region in 2001-02