International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)

Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com

Volume 2, Issue 2, March April 2013
ISSN 2278-6856

Factors Affecting Distribution of Agricultural

Credit
Veerpaul Kaur Maan1, Bhavneet Kaur2
1

Ph.D Research Scholar, Department of Management Studies, Singhania University, Pacheri Bari, Jhunjunu ,Rajasthan,
India
2

Assistant Professor, Department of Humanities & Management, PTU Giani Zail Singh Campus Bathinda, India

Abstract: Institutional credit has to go a long way in

bridging the regional imbalances in the flow of credit.
The policies initiated so far in this direction have at
best, arrested the widening of the gap. Unless the
structural defects in agriculture and the risk factor are
cushioned off, coupled with credit guarantee scheme to
the less developed areas susceptible to natural
calamities the regional gaps are likely to be continued,
irrespective of the measures initiated to rectify the
defects on the institutional front. Furthermore,
earmarking of a certain percentage of credit to less
developed regions within the country or a State or
district might help to augment the flow of credit to these
regions. The increasing participation of commercial
banks in financing of agriculture sector is the
immediate context. in which we set ourselves to
investigate the nature and degree of regional
imbalances created through the institutional credit to
agriculture. So this study attempts to find how far
commercial banks have succeeded in reducing the
regional gaps in supply of farm finance.

1. INTRODUCTION
In order to evaluate and understand the impact of various
factors on the inter-regional distribution of agricultural
credit, multiple regression analysis technique was used.
Both linear and log-linear functions were tried. The
function which gave the higher coefficient of multiple
determination, better logical and economic significance of
factors was finally selected to analyze the data for each
State.
It was hypothesized that total distribution of advances for
agriculture depended upon total cropped area in hectares
in the State, gross irrigated area in hectares and
population.
The function used as :
Y = f (x1, x2, x3, U)
(1)
where,
Y=
Total advances in rupees made by commercial
banks.
x1 = Total cropped area in hectares in the State.
x2 = Gross irrigated area in hectares in the State.
x3 = Population in thousand persons.
U = Random error
Volume 2, Issue 2 March April 2013

The results of regression analysis are discussed as

follows:
1.1 Log-Linear Regression Model
For States discussed in Table 1, the log-linear function
was used as it gave a higher coefficient of multiple
determinations. The Table 1 shows that the coefficient of
multiple determination came to be the highest of the order
of 0.9917 in case of Karnataka, closely followed by
0.9910, 0.9904 and 0.9901 in case of Orissa, Haryana and
Goa, Daman and Diu respectively. On the other hand, the
R2 was found to be lowest to the tune of 0.6608 in case of
Manipur, followed by 0.6919 for Delhi, 0.7342 of A & N
Island and 0.7829 for Himachal Pradesh. Though the R2
values were quite high indicating powerful explanatory
model, but in the states with low R2 values, there were
some other factors
also responsible for the total
agricultural advances. The perusal of Table 1 shows that
an increase total cropped area would lead towards
significant increase in total advances in the states like
Jammu & Kashmir, Manipur, Meghalya, Mizoram and
Pondicherry. The increase in total advances was positive
and statistically significant. The total advances recorded
statistically significant decline which varied from -1.58
per cent in Dadra and Nagar Haveli to -0.01 per cent of
Goa, Daman and Diu with an increase of one percent in
total cropped area. The negative effect was statistically
significant in the States of Punjab and Andaman and
Nicobar Island only. In other States, the total cropped
area could not affect the credit distribution significantly.
On the whole, the total cropped area could not play a
highly significant role in the distribution of commercial
agricultural credit.
Table 1 further reveals that with one per cent increase in
gross irrigated area, total advances increased from
minimum of 2.46 per cent in Orissa and maximum
102.50 per cent in Arunachal Pradesh and they were
positive and statistically significant. In some of the States,
the effect of gross irrigated area was negative and
statistically significant, varying from -0.06 per cent in
Haryana to -112.54 per cent in Manipur. This indicates
that advances did not increase in proportion to the
increase in gross irrigated area in these states. In case of
other States, the effect of gross irrigated area on
agricultural credit distribution was not significant.
Page 7

International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)

Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 2, Issue 2, March April 2013
ISSN 2278-6856
Table 1: Regression Coefficients of Factors Affecting Total Advances of Different States and Union Territories of
India, 1995-96 to 2009-10 (Lagged One year) (Model Log linear)
States

80

Haryana
Himachal
Pradesh
Jammu &
Kashmir
Karnataka
Madhya
Pradesh
Maharashtra
Manipur
Meghalaya
Nagaland
Orissa
Punjab
Rajasthan
Uttar Pradesh
A& N Islands
Arunachal
Pradesh
Dadra & Nagar
Haveli
Delhi
Goa, Daman &
Diu
Mizoram
Pondicherry
Assam

Exclamatory Variables
Gross irrigation

A
-87.54
-74.77

Total cropped
area
b1
-0.94(1.74)
1.27(0.12)ns

Population

R2

b2
-0.06(2.03)**
-7.46(0.62)ns

b3
11.23(9.28)***
13.02(5.03)***

.9904***
.7829***

-146.50

5.20(2.56)**

3.94(3.55)***

10.15(7.57)***

.9827***

-79.16
-65.66

-0.17(1.42)ns
x

0.16(0.73)ns
X

0.85(2.83)***
X

.9917***
.9832***

-41.51
443.36
-390.64
-26.52
-238.98
-94.78
-103.86
-88.64
-115.83
-423.63

1.81(1.55)ns
7.89(2.35)***
40.91(1.86)*
-0.04(0.26)ns
0.004(0.40)ns
-0.05(2.52)**
0.005(0.50)ns
0.001(0.05)ns
-1.53(2.15)**
0.05(0.06)ns

X
-112.54(2.16)**
37.82(5.69)***
9.77(8.28)***
2.46(4.92)***
9.99(4.71)***
-0.06(0.04)ns
3.04(1.56)ns
0.06(0.01)ns
102.50(02.78)***

5.10(5.08)***
-0.57(0.79)ns
0.29(0.15)ns
-1.44(0.39)ns
22.58(10.82)***
1.90(0.77)ns
10.91(6.01)***
6.09(2.65)***
22.73(4.51)***
14.80(1.41)ns

.9254***
.6608**
.8613***
.9739***
.9910***
.9733***
.9824***
.9715***
.7342**
.8321***

-75.72

-1.58(1.62)ns

-46.87(4.24)***

17.35(3.61)***

.9039***

-35.98
-89.41

-0.08(0.50)ns
-0.01(0.52)ns

-0.45(1.32)ns
-0.05(0.45)ns

5.24(2.77)***
13.78(9.72)***

.6916**
.9901***

-275.66
-44.70
-23.71

1.34(2.29)**
0.20(6.08)***
0.05(0.83)ns

-9.32(3.87)***
-1.59(0.59) ns
-0.03(0.23)ns

47.11(6.02)***
8.80(6.95)***
2.91(5.36)***

.8743***
.9852***
.9153***

Table: 2

States
A

Explanatory Variables
Total Cropped area Gross Irrigation
b1
b2

Andhra
-105.37
-0.005(0.04)ns
Pradesh
Bihar
807.28
-0.44(0.59)ns
Gujarat
-56087.25
X
Kerala
-48383.63
-3.30(1.23)ns
Tripura
-740.36
-0.25(1.92)*
West
1510772.2
-0.47(2.24)**
Bengal
Tamil Nadu -28562.23
-3.83(2.03)***
Figures in the parentheses are calculated t-values
*Significant at 10 per cent level
**Significant at 5 per cent level
***Significant at 1 per cent level

Volume 2, Issue 2 March April 2013

Population
b3

R2

-0.01(0.50)ns

10.65(10.48)***

.9804***

7.81(3.90)***
X
4.47(0.57)ns
-11.21(2.54)**

0.14(2.00)**
X
2.59(3.41)***
0.77(9.86)***

.7116**
.9081***
.8553***
.9421***

-1032.40(1.99)**

0.69(3.63)***

.7362**

5.27(0.77)ns

1.24(2.76)***

.7534**

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International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)

Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 2, Issue 2, March April 2013
ISSN 2278-6856
It is further revealed by the study of Table 1 that
population turned out to be the most important factor to
affect the distribution of credit. The effect of population
on distribution of credit varied from minimum of 0.85 per
cent in Karnataka to maximum of 47.11 per cent in
Mizoram. In majority of the States, except the States of
Manipur, Meghalaya, Nagaland, Punjab and Arunachal
Pradesh, the effect of population on credit distribution
was positive and statistically significant.
1.2 Linear Regression Model
The Table 2 which is based on linear model shown the
coefficient of determination ranged between 0.7116 from
Bihar State to 0.9804 for Andhra Pradesh. This indicates
that 71.16% to 98.04% of the variation in total
agricultural advances was explained by the explanatory
variables included in the regression equation. Thus the
explanatory models were quite powerful. The analysis
further shows that with one hectare increase in total
cropped area, there would be a decline in total advances
ranging from increase in total advances varied from -1.25
rupees in Tripura to -3.83 rupees in Tamil Nadu. The
effect of total cropped area was negative and statistically
significant in the States of Tripura, West Bengal and
Tamil Nadu, while it was negative but non-significant in
case of Andhra Pradesh, Bihar and Kerala.
The effect of gross irrigated area on total agricultural
credit distribution was significantly positive in Bihar,
while it was positive but non-significance in Kerala and
Tamil Nadu. The significant regression coefficient of
gross irrigation in Bihar indicates that an increase of one
hectare in gross irrigated area would lead to total
agricultural advances in the state 7.81 in an increase of
Rs. In some of the states, the effect of gross irrigated area
was negative and statistically significant varying from 11.21 rupees in Tripura to -1032.48 rupees in West
Bengal per hectare increase in gross irrigated area. It was
very serious in case of West Bengal. The reason behind
this need to be explored and curbed. In case of Andhra
Pradesh, the effect of gross irrigated area on agricultural
credit distribution was not significant.
It is further revealed by the study of Table 2 that the effect
of population on distribution of total agricultural credit
ranged from as low as 0.14 in Bihar to as high as 10.65
rupees in Andhra Pradesh for an increase of one thousand
in population in these states. In all the States, the effect
of population increase was found to be significantly
positive. This shows that there existed a significantly
positive relationship between population and total
agricultural debt.
The perusal of Table 3 has brought out one thing very
clearly that the effect of population was not significant in
almost those States which were sparsely populated and in
those States where the effect of total cropped area and
that of gross irrigated area was significant. In almost all
the States which were densely populated, the effect of
population was significant and that of total cropped area
and gross irrigated area was not significant. It indicates
that institutional credit was also being used as one of the
Volume 2, Issue 2 March April 2013

measures to dispense social justice among the rural

masses.
Table 3: Regression coefficients of factors affecting total
advances to agriculture at All India level, 1995-96 to
2009-10 (Lagged one year) (Model : Log-Linear)
Factor
Regression
t-value
coefficient
Constant
-110.07
Total cropped area
-0.0034ns
Gross irrigation
1.6484ns
Population
7.8016***
R2
0.9918***
*** Significant at one percent level
ns : Non-significant

0.45
0.95
4.45

2. CONCLUSION
Overall it may be concluded that, by all large, that the
States with proportionately less cropped area, gross
irrigated area, net irrigated area and population got
proportionately more of all kinds of agricultural advances
given by the commercial banks. However, one redeeming
feature is that as the commercial banks gained experience
and confidence of dealing with agricultural sector, the
distribution of all kinds of agricultural advances tended to
become equitable or disparity over time narrowed down.
From rural development point of view, it is a healthy
trend, which ought to be upheld and strengthened in
future.

References:
[1.] Singh, Harbans. The Study of the Spatial Distribution
of Institutional Loans in Punjab Agriculture, M.Sc.
Thesis (Unpublished), 1976, P.A.U., Ludhiana.
[2.] Prabjit, A Study into the Pattern of Distribution of
Institutional Credit Among Different Categories of
Farms, M.Sc. Thesis (Unpublished), 1976, P.A.U.,
Ludhiana.
[3.] Sagar, Vidya. "A Component Analysis of the Growth
of productivity and Production in Rajasthan-1956-61
to 1969-74", Indian Journal of Agricultural
Economics, Vol. 32 (1-4), 1977, P. 108.
[4.] Dhengade, M.P. "Regional Disparities in Farm
Financed by the Commercial Banks in Maharashtra",
Indian Journal of Agricultural Economics, Vol. 33
(1-4), 1978, P. 131.
[5.] Raju, K.S. "Regional Imbalances in the Flow of
Institutional Credit", Indian Journal of Agricultural
Economics, Vol. 33 (1-4), 1978, P. 142.
[6.] Sugaya, N. "Progress in the Flow of Rural Credit
Banks", Indian Journal of Agricultural Economics,
Vol. 33 (1-4), 1978, P. 141.

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