The Impact of Economic Policy on Institutional Credit Flow to Agricultural Sector

By Sengottuvel, E. P.; Ganeshkumar, C. | IUP Journal of Applied Economics, April 2018 | Go to article overview

The Impact of Economic Policy on Institutional Credit Flow to Agricultural Sector


Sengottuvel, E. P., Ganeshkumar, C., IUP Journal of Applied Economics


(ProQuest: ... denotes formulae omitted.)

Introduction

The macro level determinants of the institutional credit flow to agriculture have occupied a crucial position in an emerging economy like India (Timmer, 1988). The aggregate level of agricultural credit may well be considered as the combined result of macroeconomic policies transmitted through different channels (Wagh and Dongre, 2016). Macroeconomic models evolve over time due to various externalities. Some of the macroeconomic models of the Indian economy are focusing on output, the fiscal sector and external sector (Shepherd, 1970). A survey of the existing macro models indicates that while there is harmony on certain aspects of the economy, there are other areas that are less than fully understood. Depending on their objective and focus, different models have adopted different levels of disaggregation at the sector levels. Though there are variations, in general economic activities have been classified into four sectors, viz., agriculture, manufacturing, service and public administration. Intra-sectoral disaggregation levels have also differed from model to model depending on the objective of the model builder (Gillis et al, 1992). The macro level determinants play an important role in driving the flow of institutional credit to agriculture and priority sector as well. The policy on agricultural finance at macro level is primarily concerned with the levels of credit flow to agriculture, terms and conditions under which it is made available, allocation of credit between sub-sectors (production and investment) to the needy farmers, encouraging them to adopt new agricultural technology and pre- and post-appraisal of loan disbursement (Manmohan, 1995). Initially, the reforms focused mainly on the industrial and financial sectors and agriculture was mostly kept outside the scope of reforms. However, the agriculture sector benefitted indirectly from reforms due to exchange rate policy and improvements in terms of trade (Manmohan, 1995). In a country with diverse agro-climatic, socioeconomic and institutional circumstances, the need, nature and impact of input-output market reforms would differ across regions. Development of agricultural sector is critically dependent on the use of modern input such as fertilizers, seeds, plant propagation material, agricultural chemicals and the availability of credit to purchase these and other inputs. There is a need to ensure adequate and timely supply of all these inputs (Chand et al, 2007).

Economic growth is always parallel to the prevailing macroeconomic conditions. An advantageous macroeconomic environment is necessary for rapid economic growth. The Committee on the Financial Sector Reform (CFSR) formed by Raghuram Rajan intensively discussed the macroeconomic framework; the major highlights of the report may be in order. To start with, one cannot agree more with the CFSR on the need for a disciplined and predictable monetary, fiscal and debt management policies for the success of financial sector reforms and, in turn, the critical importance of a well-functioning financial system for macroeconomic stability. In addition, there cannot be two opinions on the need for financial inclusion (Swinnen and Gow, 1999). The CFSR delineates a plethora of measures for financial inclusion, recognizing that access to credit rather than cost of credit matters for the nearly three-quarters of poor households who are outside the purview of banking in India. This is even truer when the report acknowledges that the poor engage in credit dealings with the indigenous moneylenders at an exorbitant interest rate, which is well above the mandated lending rate for banks. While advocating GenNext reforms, the CFSR emphasizes the significance of a well-functioning regulatory mechanism and strongly argues for establishing new regulatory institutions and new legislative fiats for fixing the financial sector (Sunding and Zilberman, 2001). Financial liberalization is one of the reforms released to the financial sector where banking sector constituted an important component (Ramachandran and Swaminathan, 2005). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The Impact of Economic Policy on Institutional Credit Flow to Agricultural Sector
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.