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delivery performances cannot be ignored. For instance, no doubt scheduled
commercial banks have drastically reduced their share of agriculture in total
bank credit from 17-18% in the latter half of the 1980s to about 10-11% in
recent years, but it is contented that at the same time, the share of agriculture
and allied activities in the country’s total GDP at current prices (2000-05
series) have steadily fallen from 35.4% in 1980-81 to 18.3% in 2006-07 and
further to 17.4% in 2012-13. During the period, banks have been faced with
drastic structural changes in the economy in that while the share of agriculture
has so fallen and that of industry has stagnated at around 26-28%, the share
of services sector in GDP has jumped from 40% to 56.5%. Thus, there cannot
be any doubt that there are significant demand-side constraints for improved
credit delivery for agriculture and other informal sectors. But, as we referred
to it once, and as we shall presently explain, the conventional demand-side
factors have their limitations insofar as ensuring of certain role for bank credit
in the process of an inclusive and egalitarian pattern of development.
For the present, it is necessary to steer clear of the demand-side picture
that emerges by relating supply of bank credit to macro-level demand indicators
such as sectoral gross domestic product (GDP), agricultural inputs and gross
capital formation. With a view to spreading these ideas of demand-side issues,
to regional and state level distribution of bank credit, such broad indicators as
bank credit to state domestic product (SDP), ratios or relative shares in bank
credit and SDP could be analysed. These brief reviews of the trends in relevant
indicators are attempted in this section.
1. Sectoral Bank Credit to GDP Ratios
When we work out bank credit to sectoral GDP ratios, we find that the
three-phase picture of rise, fall and recovery emerges insofar as agriculture
is concerned, whereas for the other two sectors – industry and services – the
trends have been one of continuous rise (Table 8.1 and Chart 8.1). Thus, direct
credit for agriculture as percentage of sectoral GDP steadily improved from a
little over 6% in the early 1980s to a peak of 10.5% in 1989-90 or remained
around 10 to 10.5% towards the end of the 1980s. This happened when,
during the 1980s agriculture fared well and secured a decent average growth
rate of over 3.1% per annum (see Chapter 3 in this report). But, thereafter for
nearly a decade, credit to sectoral GDP ratio fell and reached the lowest level of
7.4% in 1994-95 or low level of 7.9% in 1998-99, and interestingly, as shown
in Chapter 2 of this study, this period of the 1990s has not been a period of
any serious slowdown in agriculture growth; in fact, the average agricultural
