TECHNICAL EFFICIENCY IN AGRICULTURAL PRODUCTION AND ACCESS TO CREDIT IN WEST BENGAL, INDIA: A STOCHASTIC FRONTIER APPROACH

Access to credit significantly influences land leasing decisions, and thus ultimately has a significant implication on ensuring efficiency in agricultural production. This paper attempts to examine the instrumental role of credit in ensuring efficiency in the context of West Bengal agriculture by disaggregating the analysis for two mutually exclusive groups: bank customers and non-bank customers. Empirical analysis based on Stochastic Frontier Analysis confirms that farming households having access to formal credit are, in general, practicing cultivation more efficiently by channelizing credit in the utilization of agricultural inputs. In addition, contractual arrangements and operated farm size are found to be significant determinants of observed variation of technical efficiency estimates in case of bank customers. In the context of higher probability of access to credit in case of fixed rent tenants and large farmers, it can be argued that farmers having access to credit achieved a higher efficiency level by adopting the improved technology in agricultural production. Thus an access to institutional credit would provide an incentive to the farmers to adjust the operational land by the mechanism of tenurial contract so as to bring about efficiency in agricultural production.