Caste Differences in Access to Credit in India: Evidence from NSSO Household Indebtedness Data

 

Jeril Tom

Doctoral Research Scholar, Dept. of Economics, St Berchmans College, Changanasserry, Kerala

 

ABSTRACT:

This paper explores the extent of disparity in financial access across the social groups in India using the unit level data of All India Debt and Investment Survey data published decennially by NSSO. The ratio of asset share and population share consistently improved for GEN households in both rural and urban India since 90s while for the marginalised social groups ST and SC, it improved in the first decade post liberalisation but worsened in the decade following the second millennium. In rural India, the average debt per household of the tribal population grew at a rate lower than that of all households taken together over the entire period. However, the non-institutional share of indebtedness of ST households consistently upsurged over the past three decennial rounds of NSSO in both rural and urban areas with the growth being faster in the latter. The average debt per household of ST as a percentage of ‘Others’ fell sharply and consistently in the past three indebtedness survey rounds of NSSO. ST households had the lowest incidence of indebtedness not only from institutional sources but also from all sources combined. The average amount of debt from all sources was the lowest for ST households in both rural and urban areas. Further, the productive share of credit availed, the expenses incurred on farm and non-farm business was the lowest for SC in rural areas and ST in urban areas. Looking at the agricultural credit scenario, the proportion of loans of farm households from non-institutional sources continues to dominate over that from institutional sources. This was more pronounced for marginalised castes. Evidence also suggested that the heaviest burden of Professional Money Lenders fell largely on small farm size classes and backward social groups.

 

 

 

 

INTRODUCTION:

This paper explores the extent of disparity in financial access across the social groups in India using the unit level data of All India Debt and Investment Survey data published decennially by NSSO. The Rangarajan Committee (2008) [8] defined financial inclusion as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.” In this paper, an attempt is made to assess the chronicle of credit situation across caste groups in India in the past three decades post liberalisation and weigh up the difference in credit access with the objective to shed some light on the critical issues to be deeply fathomed in financial inclusion policy formulation in India. 

DATA AND METHODOLOGY:

NSSO conducts decennial surveys to assess the asset holding and indebtedness situation across rural and urban divisions in India which come up with valuable inputs in policy research. The data pertaining to the All India Debt and Investment Surveys published by NSSO in its reports of the various rounds of its surveys held in 1991-92 (48^th round), 2002-03 (59^th round), and 2012-13 (70^th round) is used for pursuing the discussion. It will be followed by a discussion on several aspects of credit access by farm households in India across social groups pursued on the basis of the NSSO 70^th round data on the Situation Assessment Survey of Agricultural Households.

 

Key Indebtedness Indicators: Trends

In three decades since 1991-92, India witnessed a multifold increase in the average debt per household with its growth being steeper in urban centres. The average value of household assets also saw a similar upsurge but at a rate lower than that of the average debt. In rural India, the incidence of indebtedness for ‘Others’ and SC rose steadily over the three recent NSSO rounds while that of ST households declined in 2012-13 after a nominal increase in 2002-03 from its position in 1991-92. The picture is somewhat different for urban India, where the ST and SC households saw an initial drop in the incidence of indebtedness in the first decennium following reforms but registered a revival in 2012-13. The incidence of indebtedness of ‘Others’ (including OBC and otherwise) increased persistently over the period.

 

 

Table 1:  Key NSSO-AIDIS Indebtedness Indicators: Social-group wise Trend

		48th Round			59th Round			70th Round
		AOD	AVA	IOI	AOD	AVA	IOI	AOD	AVA	IOI
Rural	ST	838	52660	17.4	3205	136640	17.9	9610	505000	16.9
	SC	1394	49189	25.3	4641	125954	27.1	24458	501000	30.9
	OBC	-	-	-	8288	266033	28.9	36091	1030000	35.7
	Oth	2249	134500	23.6	10437	429513	25.7	44565	1661000	31.4
	All	1908	107007	23.4	7539	265606	26.5	32522	1007000	31.4
Urban	ST	1570	68763	13.5	9233	240295	12.2	48048	1188000	16.4
	SC	2513	57908	24.2	7744	182351	19.2	48556	831000	23.5
	OBC	-	-	-	11200	334161	21.2	77809	1625000	26.0
	Oth	3859	159745	18.8	13577	560362	15.3	106964	3535000	18.9
	All	3618	144330	19.3	11771	417158	17.8	84625	2285000	22.4

Source: NSSO All India Debt and Investment Survey, various rounds. [1][2][3][4][5]

Note: Data of OBC was not distinctly reported in the 48th round; AVA figures available rounded in Rs. (’000) as reported in NSSO 70^th round

 

The average debt per household of ST as a percentage of ‘Others’ fell sharply from 37% in 1991-92 to 30% in 2002-03 and further down to 21% in 2012-13. In urban India, the same figure increased initially from 40% in 1991-92 to 68% in 2002-03 but nosedived to 44% in the decade followed.

 

In rural India, the average debt per household of the tribal population grew at a rate lower than that of all households taken together over the entire period. Further the growth rate was faster during the period 1991-92 to 2002-03 than the ten years afterwards that. For all households, the reverse was true. SC households registered the fastest growth of average debt per household in rural India in the recent NSSO round over the preceding one. The growth of average debt per household in urban areas and average value of assets in both rural and urban areas of ST households was at a rate faster than all households over the period 1991-92 to 2002-03 but the trend reversed for both the indicators over the subsequent decade.

 

 

Asset Inequality across Social Groups in India:

The ratio of asset share and population shareconsistently improved for GEN households in both rural and urban India since 90s while for the marginalised social groups ST and SC, it improved in the first decade post liberalisation but worsened in the decade following the second millennium.

 

Table 2: Ratio of Asset Share and Population Share

		1991	2002	2012
Rural	ST	0.51	0.54	0.50
	SC	0.49	0.49	0.50
	OBC		0.98	1.01
	GEN	1.22	1.61	1.71
Urban	ST	0.48	0.60	0.54
	SC	0.40	0.42	0.35
	OBC		0.78	0.70
	GEN	1.11	1.38	1.50
Total	ST	0.48	0.49	0.40
	SC	0.46	0.45	0.40
	OBC		0.90	0.83
	GEN	1.20	1.59	1.86

Note: OBC are included in general category for 1991

Source: Himanshu (2018) based on NSSO AIDIS 59^th and 70^th rounds [12]

 

Source of Indebtedness: Trend

The institutional and non-institutional share of indebtedness increased for ‘Others’ and OBC households over the three decades post reforms except for a slight decline in the non-institutional share noticed for ‘Others’ in the recent round. For rural SC households, the share of institutional indebtedness fell in the first decade but rose only below the initial peak in the decade following. The urban non-institutional share of indebtedness also followed a similar path while the institutional share improved to some extent after registering an initial decline. The non-institutional share of indebtedness swelled throughout the period for rural SC households.

 

Table 3: Incidence of Indebtedness across Source: Social-group wise Trend

	48th round				59th round				70th round
	Rural
	ST	SC	OBC	Others	ST	SC	OBC	Others	ST	SC	OBC	Others
Insti	12	17.1	-	15.8	10.9	11.9	13.4	15.7	8.9	14.9	18.8	20.2
NonInsti	6.6	11.2	-	9.9	8.1	17	18.3	12.6	9.7	20.4	22.4	16.2
	Urban
	ST	SC	OBC	Others	ST	SC	OBC	Others	ST	SC	OBC	Others
Insti	9.1	12.6	-	11.8	6.7	8.8	9.6	9.5	9.7	13.5	16.1	14.4
NonInsti	4.9	14.6	-	8.8	5.8	11.3	12.9	6.5	8.4	12.9	13.7	6.2

Source: NSSO All India Debt and Investment Survey, various rounds. [1][2][3][4][5]

Note: Data of OBC was not distinctly reported in the 48th round

 

The institutional share of indebtedness of rural ST households fell continually from 12% in 1991 to 11% in 2002 and further down to 9% in 2012 while in urban area it fell to 6.7% in 2002 from 9% in 1991 but improved slightly the decade following. The non-institutional share of indebtedness of ST households consistently upsurged over the past three decennial rounds of NSSO in both rural and urban areas with the growth being faster in the latter.

 

Household Incidence of Indebtedness across Social Groups in India:

In both rural and urban areas, ST households had the lowest incidence of indebtedness not only from institutional sources but also from all sources combined. In rural areas, ST registered an incidence of indebtedness to the tune of 17% which was only half of all the other groups. OBC households had the highest incidence of indebtedness (36%) although their average amount of debt per household was lower than that of ‘Others’. The average value of assets (per indebted households) was lower for marginalised classes, the lowest being for SC closely followed by ST. Disturbingly the debt asset ratio was the highest for SC (12%). However the average amount of debt per household was the lowest for ST followed by SC and highest for ‘Others’.

 

Table 4: Basic Indicators regarding Assets and Indebtedness across Social Groups

Social group	Rural				Urban
	AOD (Rs. 000)	AVA (Rs. 000)	DAR (%)	IOI (%)	AOD (Rs. 000)	AVA (Rs. 000)	DAR (%)	IOI (%)
ST	57	708	8.02	16.9	293	2280	12.85	16.4
SC	79	648	12.19	30.9	206	1118	18.46	23.5
OBC	101	1138	8.89	35.7	300	1998	15.00	26.0
Others	142	2009	7.06	31.4	565	3927	14.38	18.9
All	103	1216	8.51	31.4	378	2548	14.84	22.4

Source: NSSO 70^th round

Note: AOD, AVA and DAR reported are for indebted households [6]

 

The relative position of each social group with respect to the average amount of debt per household and the average value of assets (per indebted households) in urban areas was a replica of the rural case; ‘Others’ being the most advantaged and SC being the least. ST had the lowest debt asset ratio in urban India against the second lowest position in rural India after ‘Others’. Incidence of indebtedness in urban India was the lowest for ST (16%) and the highest for OBC (26%). SC households also recorded an incidence of indebtedness lower to OBC and ‘Others’ households both in rural and urban India. Notably, the unevenness in incidence of indebtedness across the social groups thin out as we consider urban India in comparison to rural India.

 

Table 5: Average Debt per Household by Social Group of Household in Rural India

Social group	AOD per household (in Rs.) at 2011-12 prices
	2002	2013
ST	5,298	9,078
SC	7,672	23,104
OBC	13,701	34,093
Others	17,254	42,098
All	12,463	30,722

Source: Gebremariam (2016) based on NSSO 59^th and 70^th round [11]

 

The growth of average debt per rural households in India (see Table 5) was the lowest for ST and highest for SC. The growth rate of average rural household debt of OBC and ‘Others’ were more than double than that of ST households over the period 2002-13.

The Figure 1 which depicts the Incidence of Indebtedness by Social Group among MPCE Classes evidently reveals that access to credit of ST households is unvaryingly much less than other social groups in all expenditure classes in rural India.

 

 

Fig 1: Incidence of Indebtedness by Social Group among MPCE Classes: Rural India

Source: Rajeev (2015) [7]

 

Incidence of Indebtedness shall be interpreted as a mark of access to credit and not as a measure of severity of debt riddance (Rajeev 2015) [7]. A higher Incidence of Indebtedness for high MPCE Classes (as seen more pronounced among SC households) is in conformity with this stand. A lower Incidence of Indebtedness among General for the highest MPCE Class is a demand side phenomenon which connotes a lesser need for credit.

 

Purpose of Credit:

In both rural and urban areas, the major share in the purpose of loans was household expenditure for all the groups. In rural areas, ‘Others’ had the lowest proportion (55%) of their loans for household expenditure while in urban area it was OBC (79%). The productive share of credit availed, the expenses incurred on farm and non-farm business was the lowest for SC (31%) in rural areas and ST (5%) in urban areas.

 

Table 6: Percentage Distribution of Total Debt by Purpose for each Social Group

Purpose	% share of total debt in
	ST	SC	OBC	Others	All
	Rural
Capital expenditure in farm business	16.0	8.1	12.4	16.5	13.2
Expenditure in farm business	35.9	16.0	27.2	36.1	28.6
Capital expenditure in non-farm business	6.9	13.4	8.2	7.4	8.7
Expenditure in non-farm business	7.6	15.5	11.6	9.3	11.4
Household expenditure	50.8	63.2	56.3	49.2	54.8
Other than household expenditure	5.6	5.5	5.0	5.5	5.2
Expenditure in household	56.5	68.5	61.2	54.6	60.0
All	100	100	100	100	100
	Urban
Capital expenditure in farm business	0.3	1.2	1.5	0.7	1.0
Expenditure in farm business	1.2	1.6	2.9	1.8	2.2
Capital expenditure in non-farm business	2.8	4.7	8.6	9.0	8.4
Expenditure in non-farm business	3.9	6.4	18.5	16.3	16.1
Household expenditure	90.6	87.5	74.2	78.3	77.8
Other than household expenditure	4.3	4.5	4.4	3.6	4.0
Expenditure in household	94.9	92.0	78.6	81.9	81.7
All	100	100	100	100	100

Source: NSSO 70^th round [6]

 

Distribution of Debt Outstanding: Source-wise:

In both rural and urban areas, the institutional share of total debt is the lowest for SC and highest for ‘Others’. ST households had a higher percentage of outstanding institutional debt in both rural and urban area next only to ‘Others’. However it has to be recalled (Table 6) that the share of institutional indebtedness was the lowest for ST in both rural and urban areas. In this backdrop it is pertinent to have a look at the average debt per household.

 

Table 7: Percentage distribution of outstanding total debt as on 30.6.2012 by credit agency for each social group

Credit agency	% distribution of outstanding total debt
	ST	SC	OBC	Others	All
	Rural
Institutional	58.5	47.8	52.4	64.9	56.0
Non- institutional	41.5	52.2	47.6	35.1	44.0
All	100	100	100	100	100
	Urban
Institutional	83.2	70.8	76.6	92.3	84.5
Non- institutional	16.8	29.2	23.4	7.7	15.5
All	100	100	100	100	100

Source: NSSO 70^th round [6]

 

Average Household Debt: Source-wise:

Table 8 clearly reveals a lower access to credit by ST and SC social groups. The average amount of debt from all sources was the lowest for ST households in both rural and urban areas. ST had the lowest average institutional and non-institutional debt in rural area. In urban area, ST had the lowest average amount of household debt from non-institutional sources and the second lowest average amount of household institutional credit (after SC). The average institutional household debt of ST households formed only a fifth of that of ‘Others’ households in rural areas and around 40% of that of ‘Others’ households in urban area.

Table 8: Average Debt (Rs.) per household as on 30.6.2012 by credit agency for each social group

Credit agency	average debt (Rs.) per household
	ST	SC	OBC	Others	All
	Rural
Institutional	5622	11691	18912	28923	18212
Non- institutional	3988	12767	17180	15642	14310
All	9610	24458	36091	44565	32522
	Urban
Institutional	39976	34377	59601	98728	71508
Non- institutional	8072	14178	18207	8236	13117
All	48048	48555	77809	106964	84625

Source: NSSO 70^th round [6]

 

Composition of Indebtedness of Farm Households across Social Groups:

Proportion of loans of farm households from non-institutional sources (52%) continues to dominate over that from institutional sources (48%). This was more pronounced for marginalised castes. Banks were the single largest lender accounting for about 28% of all loans closely followed by the money lender (25%). 61% of the loans of ST farm households were from non-institutional sources, the major share being from moneylenders (24% of all sources) and relational sources (23% of all sources).

 

Table 9: Proportion of Loans from Different Credit Sources (%)

Credit Sources	ST	SC	OBC	Others	All
Government	2.8	2.1	2.4	2.6	2.4
Cooperatives	13.4	14.7	17.7	20.0	17.5
Bank	22.7	26.5	27.5	32.8	28.4
Institutional	38.9	43.2	47.6	55.3	48.3
Employer/landlord	0.6	1.5	1.2	1.2	1.2
Agricultural/professional moneylenders	23.5	28.8	28.0	17.5	25.0
Shopkeeper/trader	10.3	7.1	5.7	7.2	6.6
Relatives/friends	23.1	15.2	13.9	15.2	15.1
Other	3.7	4.2	3.7	3.6	3.7
Non-institutional	61.2	56.8	52.5	44.7	51.7

Source: Rao (2017) based on Situation Assessment Survey of Agricultural Households, NSSO 70^thRound.[10]

 

Access to institutional credit was lowest among the ST farm households across all the institutional sources except Govt. However the proportion of Govt. loans amounted to only 2.8% of all loans taken by ST farm households.  The proportion of bank loans for ST farm households were lower by ten percent points from the others category while the similar shortfall for the case of all institutional sources was 16 percent points. The dependence of ST households (24%) on moneylenders was lower than SC (29%) and OBC (28%) households but higher than others (18%).

 

Fig 2: Share of Credit Sources by Social Groups

Source: Situation Assessment Survey of Agricultural Households NSSO 70^th Round [6]

 

ST households had larger reliance on relational sources and shopkeeper/trader compared to other social groups.  The share of relational sources in loans of ST farm households was higher by 8 percent points from ‘others’ while the share of shopkeeper/trader was higher by 3.1 percent points. OBC farm households reported the lowest share of loans from relational sources as well as those from shopkeeper/trader. There was a 16.4% difference in institutional credit between ST farm households and ‘others’ farm households as only 39% of the loans by ST farm households were from institutional sources against the 55% in the case of others.

 

Indebtedness and Amount of Debt among Farm Households:

Table 10 clearly shows that ST had the lowest share (9%) of indebted agricultural households in total while OBC which accounted about half of it had the largest share.

 

Table 10: Extent of Indebtedness among Agricultural Households across Social Groups

Farm Indebtedness	Social group of households
	ST	SC	OBC	Others	All groups
Share of agricultural households in Total	13.41	16.34	45.43	24.83	100.00
Share of indebted agricultural households in Total	8.74	16.27	49.43	25.56	100.00

Source: Satyasai et al (2017) [13]

 

The proportion of indebted farm households and average debt increased progressively with farm sizes as seen in Table 11. The proportion of indebted farm households was the lowest for ST in all farm sizes except medium. OBC farm households seemed more debt-ridden than ‘others’ farm households. The low credit exposure of ST farm households is attributed to the lesser degree of capita intensity of their farm operation (Rao 2017) [10].

Table 11: Indebtedness and Amount of Debt among Farm Households by Farm-Size Classes

Caste	ST	SC	OBC	Others	All
Farm-size	Proportion of Indebted FHs (%)
Marginal	30.7	49.6	51.9	47.6	47.8
Small	34.7	62.1	62	57.1	55.9
Semi-medium	48.8	71.1	71.3	67.3	66.9
Medium	61.6	57.4	82.3	76.1	76.6
Large	74.4	87.9	75.7	84.9	79.8
All	34.1	52.3	56.9	53.6	52.2
	Average amount of debt per FH (Rs)
Marginal	31,395	46,341	73,094	65,598	62,635
Small	42,182	65,369	1,05,706	1,21,907	98,197
Semi-medium	58,576	1,15,665	1,38,740	1,87,653	1,44,148
Medium	1,09,513	1,58,183	2,06,142	3,07,974	2,39,552
Large	1,23,576	62,237	3,30,356	4,16,218	3,65,372
All	41,750	55,214	96,221	1,18,919	90,753

Source: Rao (2017) based on Situation Assessment Survey of Agricultural Households, NSSO 70^thRound.[10]

 

The average amount of debt per farm households for ST was only 35% of that accessed by ‘others’ group. The ratio of average amount of debt per farm households to that of ‘others’ was lowest for ST ranging between 0.47 for marginal farmers to as low as 0.29 noticed with large farmers.

 

Table 12: Average amount of outstanding cash debt by credit agencies in different social groups (Rs/household)

Social group	Institutional			Non-institutional
	Cultivator	Non- cultivator	Total	Cultivator	Non- cultivator	Total
ST	26,759	25,768	26,614	13,969	10,003	13,210
SC	32,991	29,606	31,712	26,788	15,813	21,613
OBC	37,967	34,736	37,111	29,270	24,958	27,793
Others	56,458	53,620	55,912	34,665	23,940	31,052

Source: NSSO data cited in Gebremariam (2016) [11]

 

Looking at the average amount of outstanding cash debt tabulated across cultivator and non-cultivator households in various social groups (Table 12), it can easily be inferred that the amount of credit availed from both institutional and non-institutional sources increased progressively as we move from the marginalised castes to the more privileged ones. The debt outstanding of ST households both cultivating and non-cultivating was less than half of that availed by ‘Others’.

 

CONCLUSIONS:

Caste affiliations seem to be significant in determining access to credit in India. Evidence from the indebtedness survey of NSSO speaks off the lower credit access to small farm size classes and marginalised caste groups. The vast inequality in financial access prompts one to subscribe the view that the financial deepening that the country experienced in the recent decades was less inclusive.

 

REFERENCES:

1.      NSSO (1998): Household Assets and Indebtedness of Social Groups as On 30.6.91, Debt and Investment Survey, NSS 48th Round January - December 1992, Ministry of Planning and Programme Implementation: New Delhi

2.      NSSO (2006): Household Assets Holding, Indebtedness, Current Borrowings and Repayments of Social Groups in India (as on 30.06.2002), All-India Debt and Investment Survey NSS 59th Round January–December 2003, Ministry of Statistics and Programme Implementation: New Delhi

3.      NSSO (2014): Key Indicators of Debt and Investment in India, NSS 70th Round (January – December 2013), Ministry of Statistics and Programme Implementation: New Delhi

4.      NSSO (2014): Key Indicators of Situation of Agricultural Households in India, NSS 70th Round (January – December 2013), Ministry of Statistics and Programme Implementation: New Delhi

5.      NSSO (2016): Household Indebtedness in India, NSS 70th Round (January – December 2013), Ministry of Statistics and Programme Implementation: New Delhi

6.      NSSO (2016): Household Assets and Indebtedness among Social Groups, NSS 70th Round (January – December 2013), Ministry of Statistics and Programme Implementation: New Delhi

7.      Rajeev, M (2015): Financial Inclusion and Disparity: A Case of India, Global Labour University Working Paper No. 37, International Labour Organization: Geneva

8.      Rangarajan, C (2008): Report of the Committee on Financial Inclusion, RBI: Mumbai

9.      Rao, C.S (2018): Class–Caste Differences in Access to Agricultural Credit in India, Economic and Political Weekly, VollIiI no 1, pp. 15-17

10.   Rao, C. S (2017): Caste Discrimination and Agricultural Performance in India, Economic and Political Weekly, VollIInos 25 and 26, pp. 32-38

11.   Gebremariam, R. G (2016): An Economic Study of Farm Investment by Rural Household in India, Unpublished MSc Dissertation, Division of Agricultural Economics, ICAR Indian Agricultural Research Institute: New Delhi

12.   Himanshu (2018): India Inequality Report 2018: Widening Gaps. New Delhi: Oxfam India

13.   Satyasai, K.J., Kumar, Vinod., Balanarayana M (2017): Do Farm Size and Social Group Affiliation Determine Credit Access and Income of Agricultural Households?, Agricultural Economics Research Review, Vol. 30, pp 143-152

 

 

 

 

 

Received on 09.05.2019         Modified on 27.05.2019

Accepted on 19.06.2019      ©A&V Publications All right reserved