Correlates of agrarian indebtedness in rural India

Abstract

Purpose

The purpose of this paper is to understand the factors determining the incidence and extent of indebtedness among agricultural households in rural India.

Design/methodology/approach

This study is based on a nationally representative survey carried out under the 70th Round of the National Sampling Survey Office (NSSO) across rural India. Data on household characteristics, farming characteristics, indebtedness and extent of outstanding credit have been extracted from the comprehensive survey data. Four research hypotheses have been formulated and tested using simple statistical techniques. Further, using the Heckman Selection Model, the study assesses the factors determining the agrarian indebtedness among households in rural India.

Findings

The results from the descriptive analysis show that there is a significant difference in socio-economic and farm characteristics of indebted and non-indebted households. Further, the level of indebtedness differs across sources of the loan, landholding sizes and geographical locations among agricultural households. The results of regression analysis clearly indicate that household characteristics, farm characteristics and sources of loan determine both the incidence and extent of indebtedness among agricultural households.

Research limitations/implications

The main limitation of the study is that only the data giving information regarding the amount of outstanding loans have been collected, and there is no information regarding the amount of credit availed, the purpose and the due date of payment. Further, there is scope to improve the robustness of the empirical model by adding and modifying explanatory variables.

Originality/value

There are only a limited number of empirical studies providing an understanding of the factors determining the indebtedness of agricultural households in rural India. Hence, this study is a good value addition to the existing literature.

Citation

Surendran Padmaja, S. and Ali, J. (2019), "Correlates of agrarian indebtedness in rural India", Journal of Agribusiness in Developing and Emerging Economies, Vol. 9 No. 2, pp. 125-138. https://doi.org/10.1108/JADEE-07-2017-0074