Agricultural Credit in India—The Missing Link

NTO plan for Indian agrarian reform can claim to be comprehensive IN unless it affords due recognition to the importance of providing farmers with adequate credit facilities. While the role of credit in assisting agricultural production is fairly well understood, there is less general appreciation of its contribution in acquiring farm ownership and-what is more to the point in under-developed countries-in preventing its loss. One way to secure an increase in production in underdeveloped economies is to link it with a social purpose and to assign the primary producer a more significant role in the building of the new society. To this end, the relationship of the producer with the factors of production must be made more intimate and stimulating. He cannot reasonably be expected to give of his best in the task of production as long as he thinks that the fruits of his efforts will not accrue either to himself or to the community as a whole, but will be appropriated by a few privileged individuals. Hence the need for social change which will release the genuine producers from their passive role and accord them a status of active partnership. Credit, without which many farmers cannot attain this higher status and secure a share of the factors of production, can be a powerful instrument for softening the rigid, production-inhibiting stratifications of class structure in the agricultural economy. Under a laissez-faire system, credit is extremely class-conscious and plays an important part in perpetuating and even widening inequalities. It is so oriented and organised that it helps only those sectors of the community that are economically sound and ignores those that, from its point of view, are not credit-worthy. In under-developed economies, in which impoverished farmers constitute the bulk of the agricultural population, this conception of the proper function of credit requires reorientation. In India the early British administration, attempting to improve the agrarian economy according to Western concepts of economic and social organisation and its own imperial interests, effected a revolu-