The Curious Case of Farmer Credit Cards: Evidence from an Indian Policy Reform

Somdeep Chatterjee

The B.E. Journal of Economic Analysis & Policy, 2019, vol. 19, issue 1, 14

Abstract: In this paper, I study India’s Kisan (farmer) Credit Card (KCC) program and end up with an apparently counter-intuitive finding. Exploiting plausibly exogenous variation in the reach of the program and using a district panel dataset, I find evidence of increases in agricultural output of rice, which is the major crop of the country. I also find that on average the use of high-yielding variety seeds increases at the district level, providing suggestive evidence of technology adoption. However, there is no evidence of higher borrowing among households in response to this policy. Although there is evidence of increased borrowing among the unconstrained borrowers, this suggests that KCCs did not provide new access to credit. Yet, large increases in production can be observed. Although apparently puzzling, the findings may be explained in terms of the changing risk tolerance of farmers who may perceive KCCs as supplementary self-insurance products.

Keywords: Kisan Credit Cards; risk tolerance; borrowing and lending; agricultural credit (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/bejeap-2018-0048

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