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of agriculture, that is, real credit to real GDP ratio, has made a metamorphic
jump after the beginning of the current century, particularly after the policy of
doubling of bank credit for agriculture was introduced in 2004-05. As shown
in Table 5.13 and Chart 16, there has been a sharp jump in 2004-05, and
because of the persistence on the part of the government to continue with
the policy of “doubling”, the credit-intensity continued to gallop thereafter up
to 2010-11/2011-12. The credit intensity ratio, which was at 16% in 2003-
04, jumped to 22% the next year and steadily increased to about 35-36% by
2011-12.
A pertinent question is whether the above trend reflects any
commensurate improvement in agricultural production – commensurate
with the increase in bank credit. An answer to that question requires a more
systematic study on the multiple factors that determine agricultural growth and
agricultural productivity trends and the possible role that farm credit plays in
such trends; such a comprehensive study is beyond the scope of this exercise.
For the present, we have discerned the correlation coefficient (R value) between
ground-level credit flow and agricultural GDP; it is found to be very high at
0.9741 thus confirming again that the two are highly positively correlated.
Going beyond the measure of associationship, we have again worked
out the output elasticity of bank credit based on these ground-level flow data.
As in the case of the
Handbook
series, the ground-level disbursement data also
show positive and statistically significant elasticity. The model in the form of a
linear regression has taken the following form.
Ln (Agl. GDP) = 10.8818 + 0.2082 Ln (Agl. GLC Flow)
-1
(86.8059)* (18.7731)*
Adj R
2
= 0.9462 DW=0.9626
* Significant 1% level of significance
The results suggest that as compared with an elasticity of 0.22 under
the
Handbook
series, here the GLC data give an elasticity of 0.21, that is,
an increase of 1 percentage point in real agricultural credit gives an increase
0.21% with a one-year lag on the
ceteris paribus
assumption.
Broad results of this sub-section are follows:
First, the steady decline in share of cooperatives or the corresponding
rise in the share of commercial banks and RRBs, stands out so much so
that today cooperatives account for only about 17% of aggregate credit flow,
or commercial banks and RRBs account for 83%; this contrasts with shares
