Role of institutional finance in Indian agriculture

In the past several decades, rural credit programmes have been orga nised in most of the developing countries to make institutional credit available to agriculture. Cheap and abundant credit is often regarded as an essential condition for agricultural development. This assumption has led donor agencies and governments to agressively promote rural credit. The rationale for such rural credit programmes appears to be based on the assumption that most of the farmers have low or no savings for investment, due to very little surplus of their meager incomes. This com pels, the farmers to depend on borrowed funds to perform their farm operations. The money lenders and landlords seem to be the major sources of borrowing and the rate of interest charged by them is very high. The institutional credit agencies were established to increase the supply of farm credit at a low rate of interest to induce the farmers to undertake Investment in the farm operations.

A brief review of a large number of studies in the field of farm credit Is presented in the book. The agri cultural credit structure and institu tlonalisation of farm credit in India are well presented. The need for credit, demand and supply of farm credit and the progress of institutional credit in India are clearly shown. The variations in the distribution of tarm credit between size groups, between credit agencies and between bene ficiaries and non-beneficiaries are thoroughly examined. The variations in the distribution of farm business Income between beneficiaries and non-beneficiaries and the effect of farm credit on farm business income of the beneficiaries of different size groups are examined.

Dr. Reddy's study makes a brilliant description of all these aspects and highlights the prevailing situation in India. One of the important findings of the study is that there is no signifi cant effect of institutional credit on farm business income of beneficia ries. The findings of the study will certainly show the way for policy makers and researchers among many others in the field of rural credit in future. He has employed advanced statistical technics to make his study more accurate and scientific.