Application of the Friedman Test for Measuring Agriculture Financing By Commercial Banks in Haryana

Abstract

Haryana is an agriculture dominant state of India and its 45 .82 per cent workers are cultivators or are engaged in cultivation' as agriculture labourers as per cent to total workers (Census: 200 I). The contribution of agriculture and allied activities in Net State Domestic Product (NSDP) of Haryana were ~ 1600178 crore in 1999 I 2000, which increased to~ 2001282 crore in 2006 - 07, and in percentage terms, the contribution of agriculture and allied activities in total NSDP of Haryana was 21 .40 per cent in 2006-07 (ASG: 2008). Thus, we can declare that agriculture is the lifeline of the economy of Haryana. The agricultural development is affected by several factors such as technology, infrastructure, natural climate, finance, etc. Out of these, finance is a major input for agricultural output/production. According to Jawaharlal Nehru, Former Prime Minister of India, 'everything can wait, but agriculture cannot wait'. Thus, adequate, easy, low cost credit is important for sustainable agricultural development. Agricultural credit has become more of a burning issue after banking sector reforms as in the new banking environment, banks emphasize on assets quality 2 , while the degree ofrisk is high in case ofagriculture and allied activities 3. So, banks do not feel better in giving agricultural credit. Agricultural policies in India have been reviewed from time to time to maintain pace with the changing requirements of the agriculture sector, which forms an important segment of the priority sector lending of Scheduled Commercial Banks 4 (SCBs) , and a target of 18 per cent of net bank credit 5 has been stipulated for agriculture. The Approach Paper to the Eleventh Five Year Plan set a target of 4 per cent for the agriculture sector within the overall GDP growth target of 9 per cent 6 • In this context, the need for affordable, sufficient and timely supply of institutional/formal credit 7 to agriculture has assumed critical importance. Hence, continuous study for tracking flow of agricultural credit by scheduled commercial banks is important for the sustainable agricultural development and poverty alleviation perspective. The study makes an attempt to track the flow of agricultural credit as well as analyses the comparative performance of Scheduled Commercial Banks i.e., State Bank of India and its associate Public Sector Banks and Private Sector Banks with respect to agricultural credit in Haryana from 2000/2001 to 2008/2009 by using the Freidman test.