Does access to Kisan Credit Card improve smallholder farmers' performance? Insights from Eastern India

Abstract

Farmers in India continue to be deprived of adequate and timely institutional credit. The Kisan Credit Card (KCC) scheme, introduced in 1998, sought to address this issue by providing credit support under a single window with simplified procedure. The study aims to analyze the factors affecting the adoption of KCC and its impact on farmers' economic welfare in Eastern India. We utilize a panel data of 2,537 farming households from five states in Eastern India, namely, Bihar, Uttar Pradesh, Jharkhand, Odisha and West Bengal for the years 2018 and 2023. We deploy panel probit model and random effects model to examine the determinants of access to KCC and its credit limit, respectively. We also analyze the impact of KCC on farmers' input usage, dependence on moneylenders and farm income using propensity score weighted fixed effects model. We find that farmers' participation in agricultural training, demonstrations and development programs encourage farmers to adopt KCC. Furthermore, KCC access increases farmers' input usage and reduces their dependence on money lenders. The findings of the study raise concerns over the limited penetration of the scheme among smaller-scale farmers and provide key insights into the underlying issues hindering the efficacious functioning of the scheme. This study provides novel panel-data-based empirical evidence from an economically challenged region in India, whose economy significantly depends on agriculture.