Nature of Credit Market and Profitability of Farm Households: A Study of Selected States in India

Abstract

Farmer households to a large extent depend on credit for financing their production activities. However, the nature of credit market that each household face vary, which in turn impacts the profit. This study based on an in depth analysis of 59th Round National sample survey Organisation data, India (Situation Assessment Survey of Farmers) tries to relate the nature of credit market and profitability of farm households. It is observed that interlinked contracts in credit market (such as loans from trader) yield less profit compared to that of untied contracts. The result has important implication on the distribution of borrower among lenders.  It is observed that borrowers generally avail credit from lenders who provides untied credit.

Keywords: credit, terms and conditions, accessibility