Impact of Agricultural Credit on Input Use and Paddy Productivity in Tripura

Abstract

Agricultural loan or credit is crucial for overcoming financial constraints, promoting productive and efficient input use, and improving agricultural productivity among marginal and small farmers. This study examines the importance of formal and informal agricultural credit in affecting input use, paddy productivity, and distress sale among farm households in Tripura. The study is based on primary data collected from 370 paddy-growing households across eight selected villages in Sepahijala and South Tripura districts. Ordinary Least Squares (OLS) regression and Principal Component Analysis (PCA) are employed to identify the determinants of formal credit demand and distress sale and to assess the effects of credit on input use and paddy productivity. The findings suggest that irrigation, education, operated area, family labour availability, and agricultural production are important positive determinants of formal credit demand, whereas non-farm income is negatively associated with credit demand. Informal credit is positively associated with income loss from distress sale, while access to formal credit and regulated markets reduces such losses. Both formal and informal credit have positive and significant associations with input use and paddy productivity, although the relationship is stronger for formal credit. The productivity model explains 71.2% of the variation, increasing to 78.1% after incorporating interaction effects. The findings further reveal that credit effectiveness varies across irrigation conditions and farm-size groups, with weaker outcomes among marginal farmers and in non-irrigated areas. The study suggests integrating timely formal credit delivery with irrigation development and improved market access to enhance productivity and reduce distress sales.