Impact of Agricultural Credit in the Agricultural Development of Kuttanad
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IMPACT OF AGRICULTURAL CREDIT IN THE AGRICULTURAL DEVELOPMENT OF KUTTANAD HARIKUMAR 8. Under the Supervision of Dr. JOSE T. PAYYAPPILLY Ptofessor scuoou. or MANAGEMENT STUDIES THESIS SUBMITTED TO THE UNIVERSITY OF COCHlN FOR THE AWARD OF THE DEGREE OF DOCTOR OF PHILOSOPHY IN ECONOMICS UNDER THE FACULTY OF SOCIAL SCIENCES fiepartment nf ‘lieh Efitnnnmita University oi Cochin Cochin - 682 022 March 1986 DEDICATED TO MY PARENTS -Dr. JOSE; T. PAYYAPPILLY PROFESSOR B.A., L.S.E., D.Sc. (Vienna) School of Management Studies University of Cochin COCHIN—682 022 C E;R'T I FrI C A'T E Certified that the thesis "Impact of Agricultural Credit in the.Agricultural Development of KuttanadV is the record of bonafide research carried out by Sri. Harikumar. 8 under my guidance. The thesis is worth submitting for the degree of Doctor of Philosophy in Economics; /‘"3 1-3-1986; Dr. JOSE T. PAYYAFPILLY. DECL-ARA'I'ION I declare that this report is the record of bonafide research carried out by me under the supervision of Dr; Jose.‘T. Payyappilly, School of Management Studies, University of Cochin. I further declare that this has not previously formed the basis of the award of any degree, diploma, associateship, fellowship or other similar title of recognition. Cochin . 22, HARIKUMAR. s. .1st March 1986. A_CKNQWLEDGEMENI‘ I would like to express my sincere thanks and ‘gratitude to Dr. Jose. T. Payyappilly, Professor, School of Management Studies for his able and inspiring guidance at all stages of my research work. I express my deep gratitude to Dr.K.C. Sankaranarayanan for providing inspiration and for giving comments on the earlier draft of the thesis. I am thankful to Dr; M.K. Sukumaran Nair for discussing various issues connected.with the study and also to Mr. Rajasenan D. and. Mrs. Jessy John for their help in analysing the data. I am thankful to the faculty members of the School of Management Studies for various helps rendered and especially to Prof. Rajendra Prasad for inspiration and help provided throughout the study. My sincere thanks to Faculty members of Department of Economics, Sacred Heart College, Thevara, Cochin. Librarian and other staff of Centre of Develop ment Studies,fPrivandrum. Librarian, State Planning Board,'rrivandrum. Librarian and staff of Kerala University Library, Trivandruma Director and staff of Indian Institute for Regional Development Studies, Kottayam. Manager and staff of Lead Bank, Alleppey. Joint Director of Co-operative Societies, Alleppey. Assistant Director of Co-operative Societies, Kuttanad Circle, Mankompu. Joint Director of Agriculture, Alleppey. Librarian and Staff of Ernakulam Public Library. Librarian and Staff of Central Library, University of Cochin. Librarian and staff of School of Management Studies, University of Cochin. Librarian, Department of Applied Economics, University of Cochin. Administrative-staff of Department of Applied Economics. I am indebted to the University of Cochin for awarding me a fellowship to conduct this study. I thank the households of Kavalam, Veliyanad, Kozhimukku and'Thalavady who gladly responded to my I also ‘acknowledge the cooperative and helpful attitude of all my fellow research scholars of Department WJ?-I 1.’. of A%>p1:!.’ed Economics. especially Antony, Prashanth, Mathgw, Sister Vandana, Sisy and Lizy and also .-Pabu of Department of Electronics. Finally I thank Venkitesh for typing the thesis correctly and neatly, HARIKUMAR. S . IEIEDUUCBION u 21 101. 800.50: Agricultural cxadtu Q53. lonooruhurxoblum 1930 Obdotvua 1¢Co Hypothesis 1.5. «HISHDCDIOOI g.o. Limitations 1.7. pm at the study Qflllilufiifilnlllii-5 19.0 Aotnxtun Rolatons in Developing dbnusttou 1.9. Xutotltnkauu in tho raatoznuaxkat 13 Appandlx chqpto:M- I 22 up 25% 11 C%PITAL FORMATION 26 - G5 2.1. titan capital in Axioultuxo 27 2.1.1. Villagouvise Campaxison of Fixed capital 1.1.3. componcts o£ Fixed capital 38 3.1o2o1o band 2.1.2.2. ramm.Bu11d1ng 29 3o1o2.3o Irrigation Applianos, Machinery Implamnts an.0thara 2o1o3oCo Livestock 30 CHAPTERS Pages 52.2. Extent of Gross Capital Formation 31. 2.2.1. Components of Fixed Capital 32, 2.2.1.1. Land 32 2.2.1.2. Farm Buildings 32 2.2.1.3. Irrigation Appliances. 33 2.2.1.4. Farm.Machinery 34 2.2.1.5. Implements 34 2.2.1.6. Livestock 35 2.3. Classification of Capital Formation 36 2.4. source of Capital Formation 37 2.4.1. Income, Saving and Investment 38 2.5. Determinants of Investments 40 2.5.1. High.Net Returns 42 2.5.2. Existence of Share Cropping 45 2.5.3. Low Savings 48 2.5.4. Population 49 2.5.5. Government Investment 49 2.5.6. Size of Holdings 50 2.5.7. Religious and Social Factors 51 2.6. Future Capital Requirements 51 Appendix Chapter - II 52 TABLES 53 - 65 III AGRARIAN RELATIONS IN KUITANAD 66 3.1. Evolution of Agrarian Relations 3.2. Land Owners 78 CHAPTERS Pag s. 3.3. T en ant s 82 3.4. Terms and Conditions of Land.Leasing TABLES 89 - 95. IV DEMAND FOR AGRICULTURAL CREDIT AND INDEBTEDVESS 96 - 147 4.1. Borrowings: 97 4.1.1. Factors Affecting Borrowings 99 4.1.2. Changes in the Volume of Borrowings 103 4.1.3. Purpose-wise Borrowings 104 4.1.4. Borrowings According to Cost 107 4.1.5. Security 108 4.1.6. Grain Loans Borrowed 108 '4.1.7. seasonality of Borrowings 109 4.2. Utilization of Credit 110 4.3. Problems of Assessment of Credit Requirement 110 4.3.1. Credit Needs in Agriculture 115 4.3.2. Assessment of Investment Credit 117 4.4. Indebtedness 119 4.4.1. Volume of Indebtedness 119 4.4.1.1. Proportion of Indebted Families 119 4.4.1.2. Factors Affecting Proportion of Indebted Families 120 4.40103 O Size of Debt 121 404C2Q Credit and Indebt ednes S 127 TABLES 130 - 1427 1-‘SR5 Pages W SUPPLY OF AGRICULTURAL CREDIT 149 - 179 .35.1, .Agencies Relative Importance of Credit 150 i5.1.1. Proportion of Borrowings 150 ='_$.1.2. Proportion of Debt 151 5.1.3. Proportion of Credit Supplied 152 5.2. Cooperative Credit 153 5.2.1. Flow of Short'rerm Credit 158 5.2.1.1 Distribution of Inputs 159 5.2.2.5.2.4. Medium Securities Tenn Credit 161 160 5.3. Commercial Banks 162 5.4. Government Loans 163 5.5. Moneylending 164 5.6 Friends and Relatives 165 5.7. Relations Between Moneylenders TABLESand Organized Institutions 170 - 165 178 VI CONTRACTUAL ARRANGEMENTS AND IMPLICIT INTEREST RATES 1?q -- 215 6.1. Moneylending Practices in Rural 6.1.1.Kerala Mortgage 181 181 6.1.2. Promissory Notes 183 (fl@PTERS Pages 601030 Loans Advanced Against Crops 183 601040 Cash Advance Against Repayment in Kind 185 5.1.5. Pledging Ration Cards 185 5.1.5. Chit Funds 186 5.1.7. Gold Loan 186 5.1.5. Loans to Smal1‘rraders 187 5.1.3.1. Daily Loans 187 5.1.5.2. weekly Repayment System 187 5.1.5.3. ‘The Roll 188 5.2. Contractual Arrangements in Credit Market in Kuttanad 188 6.2.1. Professional Moneylenders 188 6.2.2. Agricultural Moneylenders 190 6.2.2.1. Cash to Cash 191 6.2.2.2. Kind.tofKind 191 6.2.2.3. Cash to Kind 194 6.2.2.4. Usufractuary'Mortgage 195 6.3. Coexistence of Multiple System of Loans 197 6.4. High Rate of Interest 199 6.4.1. Nature of Securities 199 6.4.2. Purpose of Borrowing 200 6.4.3. Distribution of Loans 201 crmvrnas Pages 6.4.4. Size of Holdings 202 6.4.5. Size of Loans 202. 6.5. Decomposition of Rate of Interest 202 6.5.1. Risk Premium 204 6.5.2. Cost of Administering Loans 205 6.5.3. Alternative Rates of Returns 205 TABLES 205 -214 THE IMPACT OF AGRICULTURAL CREDIT ON AGRICULTURAL DEVELOPMENT 215 _ 25t 7.1. Impact Analysis 217 7.1.1. Land Utilisation 217 7.1.2. Cropping Pattern 218 7.1.3. Cropping Intensity 219 7.1.4. Structural Changes. 220 7.1.5. Irrigation 221 7.1.6. Adoption of High.Yielding Varieties 221 7.1.7. Output Pattern 222 7.1.8. Adoption of New‘rechno1ogy 224 7.1.9 Income Effect 225 7.1.10 Savings 2267 7.1.11. Employment Effect 227 CHAPTERS 7.20 Conclusions 228 7.3. Recommendations 229 TABLES 241 - 252 APPENDICES BIBLIOGRAPHY LI ST OF TABLES N00 es 2.1. Farm Assets Structure in Each Classt in the Selected.Villages of Kuttanad 53 2.2. Farm Assets Per Acre in Each Class; in Kuttanad 54 2.3. Per Acre Capital Formation in the Selected Villages of Kuttanad 55 Per Acre and Percentage Component of Capital Formation in Kuttanad 56 205. Classification of Capital Formation 57 2.6. Sources of Capital Formation in the Selected Villages of Kuttanad 58 2.7. Income. Saving and Investment 59 208(3) 0 Levels of Output Per Acre and Inputs Per Acre in Different Size of Holdings in Kavalam 60 2.8(b). Levels of Output Per Acre and Inputs Per Acre in Different Size of Holdings in Veliyanad 61 2.8(c). Levels of Output Per Acre and Inputs Per Acre in Different Size of _Holdings in Kozhimukku 62 2.8(d). Levels of Output Per Acre and Inputs Per Acre in Different Size of Holdings in‘rhalavady 63 2.8(e). Levels of Output Per Acre and Inputs Per Acre in Different Size of Holdings in Kuttanad 64 2.9. Extent of Participation by Landlords and'renants in Productive Investment in the Selected Villages of Kuttanad 65 Table NO.