Role of Agricultural Credit in Enhancement of Paddy Productivity and Farm Income in India

The present study aims to estimate the effect of agricultural credit on paddy productivity and farm income in India. Using National Sample Survey Office data for the year 2018–2019, we deploy an endogenous switching regression model to assess the real impact of access to credit, and we find that it has significantly increased productivity and income. Access to credit is also expected to benefit those who have not yet accessed it. Some of the factors that significantly determine access to institutional credit for agriculture are extension contacts through progressive farmers, training, medium-sized farms, awareness of minimum support price, crop insurance and social category. Therefore, extending credit access to all farmers and enhancing the financial literacy of paddy farmers in utilizing institutional credit are likely to contribute to increased yields and higher farm incomes. JEL Classification: D13, Q12, Q14