Academic journal article Madhya Pradesh Journal of Social Sciences

Credit Disbursement by Primary Agricultural Credit Societies in Madhya Pradesh: An Inter-District Analysis

Academic journal article Madhya Pradesh Journal of Social Sciences

Credit Disbursement by Primary Agricultural Credit Societies in Madhya Pradesh: An Inter-District Analysis

Article excerpt

Introduction

Agriculture continues to be the most vital sector of Indian economy, contributing a major share to our national income and also providing livelihood to the majority of our population. A strong base of agriculture growth is must for the overall economic development in a country like India. Agricultural growth depends on the growth of productivity, which in turn requires sustained infusion of finance. The growing tendency among the farmers to replace the traditional farming practices with scientific and modern technology has necessitated the increased use of capital both for improving farm infrastructure and for meeting the operational cost. Consequently, the need for cash in rural economy has increased manifold as one of the strategic inputs for agricultural development. Besides this, most of the Indian farmers being trapped into the vicious circle of indebtedness, the institutional flow of finance through agricultural and rural development programmes would prove significantly in their overall development. Rural finance, therefore, plays an important role not only in production, storage, maintenance and marketing, but contributes immensely to the expansion of agricultural activities. Credit contributes to accelerating the agricultural development provided it is adequate, cheap and development oriented (Belshaw 1931; Galbraith 1952; Myrdal 1968; Schultz 1964). It is almost impossible for a poor farmer to adopt the continuously changing agricultural technology with increasing demand in investment requirements (Singh & Sagar 2004). Small farmers during the sixties and seventies had lagged in the adoption of high yielding variety (HYV) technology due to inadequate flow of institutional credit (Muthiah, 1972; Parthasarathy and Prasad 1978; Schluter and Parikh 1974). High quantum of credit is required not only for short term cash inputs like use of improved seeds, fertilizers, insecticides, etc, but also for medium and long term investment for irrigation and land development activities by the farmers to enhance farm productivity and fulfillment of their goals (Rath 1998).

The phenomenal expansion of credit from the institutional sources has been the most important feature of agriculture credit in independent India. The share of institutional credit sources in the supply of rural credit in India has registered a tremendous growth from only 7.3 per cent in the year 1951-52 to 56.6 per cent in 1991-92. The relative importance of non-institutional credit agencies has declined over the years. Institutional credit agencies such as Co-operatives, Commercial Banks and Regional Rural Banks are advancing term loans to farmers to help them to adopt better technology and improve agricultural practices for raising crop productivity and production. The flow of institutional credit for agriculture has increased from Rs.24.23 crore in 1950-51 to Rs. 53504 crore in 2000-01, registering a trend growth of about 13.7 per cent from 1970s to 2000-01 (Sukhadeo & Smita 2004).

Apart from substantial expansion in the flow of credit by Commercial banks and Regional Rural Banks, the Co-operative societies are equally important institutional agencies for providing credit support for agricultural and rural development. Agricultural cooperatives are very actively involved in several agricultural related activities including disbursement of agricultural credit. It is the Primary Agriculture Credit Societies (PACS), which deal directly with the individual farmers providing short term and medium term credit.

At the end of March 2001, there were approximately 99,000 PACS with total membership of 999 lakh people, of which around 47 per cent were the borrowing members. Theses societies have extended their coverage from 65.88% villages in 1960-61 to 98.35% villages in 2000-01. The average membership per PACS has increased from 42 in 1950-51 to 1011 in 2000-01 (Singh & Sagar 2004; Sukhadeo & Smita 2004). …

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