Impact of agricultural credit disbursement on cereals yield in Odisha

Abstract

AbstractRealizing the significance of agricultural credit and considering millets and rice are the major crops in Odisha, this study proposes to examine the impact of agricultural credit disbursement (crop loan and term loan) on the yield of total cereals, millets and rice for the period 2000–01 to 2019–20. To examine the cointegration relationship among the variables, an autoregressive distributed lag (ARDL) bound F‐test, and to investigate the impact of agricultural credit on yield of total cereals, millets and rice, an ARDL regression modelling framework is employed. The empirical result for the bounding F‐test provides a statistically significant relationship between agricultural credit and yield of total cereals, millets and rice at 1% level, confirming the long‐run equilibrium relationship in the models. The long‐run impact of crop loans positively affects the yield of total cereals and rice, whereas it has no statistically significant effect on the yield of millets. Moreover, the change in term loan negatively affects the yield of total cereals, millets and rice in the long‐run, where the magnitude is higher in the rice yield compared to the yield of millets. However, in the short‐run, both crop and term loans negatively affect the yield of total cereals, millets and rice. Based on the findings of this study, few policy implications have been suggested to reduce the negative consequences of agricultural credit on cereal yields in Odisha.