Access to Formal Credit in the Indian Agriculture: Does Caste matter?

Abstract

Access to resources and opportunities can be a critical factor in improving outcomes for disadvantaged groups. Improving access to financial resources, in particular, is widely acknowledged to facilitate upward economic and social mobility. Conversely, lack of access to resources for certain groups based on caste, class, gender and ethno-social identities can perpetuate inequalities. In this context, this paper attempts to analyse the access to credit by social groups and decomposes the gross credit differentials using Oaxaca-blinder decomposition method using unit-level data from the All India Debt and Investment Survey, NSSO, 2013. The descriptive analysis clearly shows that there is a significant credit differential between forward caste (FC) and other social groups (SC, ST and OBC). Access to credit varies across social groups based on many factors. The decomposition result indicates that the discrimination coefficient against SC is 49per cent which explains that SCs are being discriminated by 49 per cent compared to FCs in the formal credit market. In case of ST, the discrimination coefficient against is 61per cent and for OBC it is 48per cent. Interestingly, the endowment difference is less among ST (38per cent) compared to SC and OBC (around 51 per cent). Also, the FC treatment advantage (benefit of being a FC in the credit market) is 5.7 per cent whereas the cost of being an SC in the credit market (treatment disadvantage) is 35.1 per cent. As expected, the disadvantage component for ST and OBC is 33.1 per cent and 17.8 per cent respectively. Thus, we see that although programmes, schemes and policies to promote the economic empowerment of lower castes through finance have been implemented on a large scale since the 1990s, they have not been very effective.