Chapter 5: Role of Institutional Credit in the Development of Agricultural Sector: An Empirical Study on India

The study aims to investigate the evolving dynamics of India’s agricultural sector, particularly the shift from reliance on informal money lenders to a more prominent role of institutional credit in recent decades. This transition is seen as empowering farmers with increased access to funds for crucial investments in areas such as better seeds, fertilizers, irrigation systems and mechanization. Employing the Vector Autoregressive methodology on secondary data sources spanning from 1990 to 2022, the researchers seek to explore the impact of institutional credit on the agricultural sector. To address this, researchers used direct institutional credit and the share of gross value added of agriculture and allied sectors at current prices, finding that neither of them causes the other. Further analysis concludes that in the future, the contribution of credit will have some impact on development. Recognizing the significance of agriculture as the backbone of many economies, the study emphasizes the potential contributions of enhancing this sector through improved practices, advanced technologies and enhanced rural infrastructure. Ultimately, such developments are expected to drive increased productivity and overall output in the agricultural landscape, making a substantial contribution to economic growth.