THE ECONOMIC WEEKLY SPECIAL NUMBER JUNE 1960

The A l l - I n d i a R u r a l Credit Survey

Viewed as a Scientific Enquiry
Daniel Thorner

In the nine 'years since the Rural Credit Survey was launched, the practical recommendations of the
Committee of Direction have been first enthusiastically adopted and then suddenly shunted aside by the Gov-
ernment of India.

Policy apart, the Report of the Survey may be considered in its own right as a scientific document.
An assessment at this date may be of timely interest as the Reserve Bank is planning another survey of equally
vast dimensions. For its part, the Government of India in New Delhi is considering the appointment of an
All-India Commission on Agriculture. Rural credit may well be included in the Commission's terms of reference.

During the past eight years, the author of this critique has been studying land reforms, agricultural
labour, agrarian regions and rural credit. In 1958-59, he made a 10,000 mite tour by road of India, visiting
more than 100 co-operatives of various types.

Together with Mrs Alice Thorner, Dr Thomer has published in this and other journals a number of
articles on Indian economic and statistical subjects which are to be issued in collected form by the Asia Pub-
lishing House of Bombay under the title, Land and Labour in I n d i a : Selected Studies.

Dr Thomer is taking up an appointment in Paris for 1960-61 as Associate Professor in the Ecolc
Pratique des Hautes Etudes, at the Sorbonne.

THE Reserve B a n k of India an- make recommendations, the Bank o f savings a n d deficits i n the a g r i -
nounced in A u g u s t 1951 its de- a p p o i n t e d an expert Committee of c u l t u r a l economy, the trends, if any,
cision to sponsor a c o u n t r y - w i d e Sur- Direction. A l t h o u g h small — its t o w a r d shifts i n income, and the
vey in order to o b t a i n a f a c t u a l ba- membership consisted of three h i g h - p r o b l e m o f capital f o r m a t i o n i n r u -
sis f o r the f o r m a t i o n of long-term r a n k i n g Reserve Bank officers and r a l areas." (Survey Report, V o l I,
policy in the sphere of r u r a l credit. two non-officials — the Committee Part 2, p 704.)
Not s u r p r i s i n g l y , problems of a g r i - included men of wide experience, in A c t i n g p r o m p t l y , the Committee
c u l t u r a l finance and v i l l a g e debt h a d v i l l a g e surveys, a g r i c u l t u r a l credit of D i r e c t i o n organized an elaborate
p r o v i d e d the topics f o r a l o n g series operations, and general a d m i n i s t r a - programme of field investigations
of earlier governmental enquiries. tion. The Reserve Bank instructed w h i c h were carried o u t over the year
One i m p o r t a n t feature distinguished
the Committee to c a r r y out a Survey 1951-52 in 600 villages located in
the proposed R u r a l Credit Survey
w h i c h w o u l d "adequately cover dif- 75 of India's 302 administrative dis-
f r o m its predecessors. These h a d re-
ferent strata of the a g r i c u l t u r a l po- tricts. I n A p r i l 1952. when well
lied p r i m a r i l y on the time-honoured
p u l a t i o n in representative parts of more than half of their field survey
method o f i n v i t i n g " e v i d e n c e " f r o m
the c o u n t r y w i t h reference to their was over, the Committee reported
persons deemed to he particularly
credit needs and to the agencies, ex- o p t i m i s t i c a l l y to the Reserve Bank
knowledgeable. The, Reserve Bank,
isting or needed,, f o r f u l f i l l i n g those that the q u a l i t y of the data collected
by contrast, called f o r the direct
collection of fresh field data. requirements." The Committee were was on the whole, satisfactory. They
also asked to look i n t o other aspects anticipated t h a t their r e p o r t w o u l d
To design and conduct this Sur-
of r u r a l l i f e , " s u c h as the pattern be completed in October of the same
vey, to i n t e r p r e t its results and to

T h e A l l - I n d i a R u r a l Credit Survey, as finally issued in Bombay by the Reserve Bank over the signatures of
the Committee of D i r e c t i o n , consists of three volumes.

Volume I is called the Survey Report and is in two p a r t e :

Part I (Rural Families) and Part 2 (Credit Agencies), dated respectively 1956 and 1957.

V o l u m e II is called the General Report a n d contains the Committee's recommendations; it is dated

B o m b a y , 1954.
V o l u m e HI i« called the Technical Report and is dated Bombay, 1956. P r a c t i c a l l y all of this t h i r d
volume consists of tables of d a t a (900-odd pages), blank schedules, and summaries of the instructions o r i g i -
nally issued to the staff f o r filling up the schedules. Hence the volume m i g h t better have been called Data
or "Tables" P r o p e r l y speaking, we are still without a technical report on the R u r a l Credit Survey.

A h i g h l y condensed version of V o l u m e I, The Survey Report, was issued by the Reserve Bank in
1955. It is entitled. All India Rural Credit Survey. V o l u m e I, The Survey Report: Summary.

There are two official condensations of V o l u m e II, The General Report. One is a brochure in 64 pp
entitled V o l u m e H, The General Report: Summary; the other is a c r o w n octavo book of 300 pp entitled,
The General Report: Abridged Version. Both of these were published by the Reserve Bank in 1955.

949
 SPECIAL NUMBER JUNE 1960
year. T h i s was, of course, m u c h
too sanguine. In the m i d d l e of De-
cember, 1952, the Committee of
D i r e c t i o n had to advise the Reserve
Bank that the w o r k had t u r n e d out
to be m u c h more than anticipated.
Efforts were being made to expedite
matters, and it was hoped to have
the A l l - I n d i a report ready in a few
months' time. Progress was reported
in, the p r e p a r a t i o n of regional and
A l l I n d i a tables.
By August, 1954, three years after
the Survey was launched, the Com-
mittee was ready w i t h its recom-
mendations. T h e 580-page General
Report e m b o d y i n g these p o l i c y pro-
posals referred only casually to the
results of the field w o r k . A brief
resume of the Survey's findings,
however, appeared a few months later
in a separate 150-page Summary
w i t h an 8-page statistical appendix.
Another two years elapsed before
the p u b l i c a t i o n — in the Survey
Report and the Technical Report, to-
gether containing 1000 pages of
tables and 1800 of text — of the
authoritative version of the Survey
data and the Committee's analysis
thereof.
By the time that the field results
were made available in this f o r m ,
their significance had come to be a
matter of academic interest. The
Government of I n d i a and the Re-
serve Bank had already accepted
and taken m a j o r steps to implement
the 1954 recommendations of the
Committee of D i r e c t i o n . Since only
a h i g h l y condensed discussion of the
findings had been p r i n t e d , neither
the actual figures nor the methods
by w h i c h they had been obtained
c o u l d be evaluated objectively. None-
theless, the great q u a n t i t y of mate-
rials k n o w n To have beeen amassed
and presumed to have been taken
into account lent unusual weight to
the Committee's conclusions. Fur-
ther, the R u r a l Credit Survey ( R C S )
enjoyed the prestige of h a v i n g been
conducted under the auspices of
I n d i a ' s premier f i n a n c i a l i n s t i t u t i o n .
With this impressive backing, the
Committee's proposals- neatly carried
the day. Before the heavy tome? of
the Report could be p r i n t e d , let
alone read, studied, or discussed,
the p r o g r a m m e of action was under
way. B i l l s were speedily introduced
and passed, the highest bank in
I n d i a was nationalized, a govern-
mental warehousing c o r p o r a t i o n was
created at the Centre, and a phas-
ed' plan to cover the r u r a l areas w i t h
a network of new-style large-sized
co-operative societies was under-
taken by the States.
A l t h o u g h the data collected by
the R u r a l Credit Survey ( R C S )
c o u l d not readily be d r a w n u p o n at
the time when action was being
taken on the Committee's recom-
mendations, these materials have
subsequently come to be cited in a
wide variety of contexts. Internation-
al agencies have evinced interest in
using the RCS as a model f o r i n -
vestigations of a g r i c u l t u r a l credit
problems in other countries. A pro-
posal to repeat the survey on a ducted to see how the new schedules
grand scale in I n d i a is c u r r e n t l y re-
ceiving consideration. A c c o r d i n g l y ,
it w i l l not be out of place to attempt
an assessment of the RCS as a scien-
tific e n q u i r y leaving aside the ques-
t i o n of its influence on p o l i c y .
Dimensions of the E n q u i r y
The decision to undertake such
an enquiry, it w i l l be recalled, was
made in August, 1951. By the end
of October, 1 9 5 1 , the investigators
had started on their way to the 600
villages selected f o r survey. These
field workers carried with them
seven schedules and five question-
naires. The most i m p o r t a n t of
these schedules was entitled, 'De-
mand Schedule N o . 1 : General." I t
was the basic document of the Sur-
vey, and is usually referred to brief-
ly as the general schedule. It con-
tains roughly 100 questions to be
put to all families in the 600 villages,
that is a grand total of 127,000 fami-
lies. Topics for w h i c h data were to
be collected on this general sche-
dule i n c l u d e d : specified types of
capital expenditure i n a g r i c u l t u r a l
and non-farm business, f a m i l y ex-
penditures and other miscellaneous
expenditure, sales of assets, borrow-
ings, repayments of loans, outstand-
i n g indebtedness, and outstanding
dues.
The other six schedules and the
five questionnaires contained five
hundred questions w h i c h were to be
filled up at least once each for 15
sample families in each of the 600
villages, that is. f o r a m u c h smaller
sample of 9000 families. As against
the data on 127,000 families obtain-
ed by the general schedule, the data
secured f r o m the 9000 families are
termed in the survey, the "Intensive
E n q u i r y data." In part, these " i n -
tensive" schedules traversed in
greater detail the same g r o u n d as
the general schedule; in part, how-
950
THE ECONOMIC WEEKLY
ever, they asked a w i d e v a r i e t y of
new questions.
It is w o r t h pausing a moment to
consider the i m p l i c a t i o n s of the
pace at w h i c h the RCS was conduct-
ed. In less than three months (i.e.,
f r o m August to October 1951) the
nature of the e n q u i r y was decided
u p o n ; a multi-stage s a m p l i n g design
p r e p a r e d ; 600-odd questions f r a m -
ed, translated i n t o a h a l f a dozen
languages and p r i n t e d ; and a staff
of investigators and inspectors re-
cruited, trained, and sent i n t o the
field. No p i l o t e n q u i r y was con-
w o u l d w o r k out. N o t r i a l tabulations
were made to see whether the sche-
dules w o u l d y i e l d the requisite data
i n suitable f o r m .
WORK-LOAD OF FIELD STAFF
T h e schedules and questionnaires
to w h i c h we have referred above
constitute o n l y the " d e m a n d " forms.
In a d d i t i o n , there was an equal
number of " s u p p l y " forms, that is.
seven " s u p p l y " schedules and five
" s u p p l y " questionnaires. These were
got ready after the finalising of the
" d e m a n d " forms and sent out to the
225 investigators and inspectors. A l l
the " s u p p l y " and " d e m a n d " f o r m s
were to be completed by the m i d d l e
o f 1952.
The field staff were also instruct-
ed to collect comprehensive back-
g r o u n d data on the districts in w h i c h
they were w o r k i n g . Topics on w h i c h
d i s t r i c t i n f o r m a t i o n was to be gather-
ed i n c l u d e d : r a i n f a l l , climate, water
supply and i r r i g a t i o n ; crop pattern,
p a r t i c u l a r l y for commercial and
garden crops; processing plants, i n -
dustry i n general and m i g r a t i o n ;
transport arrangements, costs and
n e t w o r k ; m a r k e t i n g centres and
value of total transactions. A de-
tailed l i s t i n g of all types of banks
was to be made and a district map
prepared on w h i c h the above data
were to be indicated. Above and
beyond all this, the field staff were
to sketch the structure of s u p p l y of
r u r a l credit by all agencies and an-
alyse their i n t e r r e l a t i o n s ; character-
ize the l i q u i d i t y of credit, the work-
ing of co-operatives, the financing of
m a r k e t i n g , the relations of land-
lords, tenants, and cropsharers, the
w o r k i n g of the debt relief laws, and
the extent of evasion of legislation
for the control of moneylenders.
Supervision, l i k e t r a i n i n g , appears
to have been s k i m p y . To ensure u n i -
f o r m understanding and implement-
THE ECONOMIC WEEKLY
ation of instructions there has to be
frequent contact between the higher
officers and the men in the field. In
the RCS, the arrangements f o r the
guidance and control of the field
staff were less than adequate.
MERCILESS SCHEDULE
A rigorous time schedule was set
by the Committee of D i r e c t i o n in
Bombay f o r the completion of the
various phases of the field w o r k .
Inspectors were required to send in
f o r t n i g h t l y progress reports to
prove that they were keeping up to
schedule. In I n d i a it is an old story
that if "progress" has to be report-
ed, it will be reported. After all,
what is progress but i n k m a r k s on
paper? W i t h heavy workloads, a
merciless time schedule, and unre-
lenting pressure for adherence to i t ,
what could the men in the field do
but frantically fill up forms and send
them in without p a y i n g attention to
the q u a l i t y or consistency of the
data ?
The course followed in 1951-52
by the Committee of Direction
might perhaps have been partially
understandable if their Survey were
the fifth or sixth of a series of such
surveys w h i c h had already explored
and re-explored all the major fa-
cets of the r u r a l credit scene. But
the 1951 Survey was the first of its
k i n d in I n d i a . The least that the
Committee of D i r e c t i o n could have
done was to define their task as a
w h o l e ; and to indicate the phases
in w h i c h they would cope w i t h i t .
There is n o t h i n g in the instructions
f r o m the Reserve Bank to indicate
that all the field work had to be
completed in twelve months or less.
F r o m the point of view of the
Reserve Bank's announced needs for
data to formulaic long-term r u r a l
credit p o l i c y , there would seem to
have been no basis whatsoever for
so frenzied a pace 17 there was
some other ground for the urgency,
its nature is nowhere set f o r t h .
F a r m Business A p p r o a c h
Let us now consider whether the
sum total of the items included in
the RCS schedules and question-
naires — even if filled up w i t h
great care — w o u l d have been ade-
quate to provide an understanding
of the conditions and w o r k i n g of
a g r i c u l t u r a l credit i n I n d i a . O n the
" s u p p l y " side the Committee's tar-
gets for the collection of quantitative
data were e x t r a o r d i n a r i l y modest.
Moneylenders, traders, and a g r i c u l -
turists w i t h l i q u i d resources were
well k n o w n to be the chief suppliers
of credit in the countryside. So far
as concerns the last g r o u p , the peas-
ants who lent money, the Committee,
in d r a w i n g up their s c h e d u l e for
r u r a l families refrained from ask-
ing them how much they had lent
o r were lending. I n e x p l a i n i n g this,
the Committee declared that they
could not hope to get reliable re-
plies. They expected that these
agriculturists w o u l d refuse to dis-
close what they lent. When we t u r n
to the only questionnaire d r a w n up
for professional moneylenders, we
find that here as w e l l the Committee
d i d not include questions asking
the moneylenders how many loans
they had outstanding or what was
the total amount of credit they had
extended. N o r were these questions
put in the questionnaire f o r traders
in a g r i c u l t u r a l commodities. Even
at the outset the Committee seem
to have abandoned hope that they
could obtain quantitative data on
the " s u p p l y " side f r o m the persons
in the best position to know, i.e.,
the p r i n c i p a l suppliers, themselves.
On the " d e m a n d " side the Com-
mittee set out direct questions for
families as to whether they had
borrowed any money d u r i n g the
previous twelve months; if so, how
much, for what purpose, and from
what type of supplier. They were
also asked if they had made any
repayments of old debts d u r i n g the
year and how much they still owed.
For the analysis of these data on
borrowings the schedules included
certain additional questions on fa-
m i l y assets, income and expenditures.
O C C A S I O N S FOR B O R R O W I N G
However, nothing l i k e a complete
survey of the f a m i l y economic posi-
t i o n was attempted in the general
schedule or in the more detailed i n -
tensive schedules. The Committee
of D i r e c t i o n have explained that
because of the large scale of the
e n q u i r y , the RCS was not designed
to record enough data on any single
f a m i l y so that a proper balance could
be struck on either capital account
or current account. Instead of an
overall approach the RCS concent-
rated on "activities directly affecting
the debt position........".'Questions
Survey Report, V o l I, Part 1,
(Rural Families), p 228. Hence-
f o r t h , unless otherwise indicated,
all citations of the Survey Re-
port w i l l refer to this first part,
Rural Families.
951
SPECIAL NUMBER JUNE 1960
were designed in order to b r i n g out
transactions presumed "specially" to
lead to borrowings or repayments.
The need to b o r r o w was envisag-
ed as s p r i n g i n g from three sour-
ces: f r o m cultivation, f r o m economic
activities other than c u l t i v a t i o n , and
f r o m the maintenance of the house-
h o l d . Expenditures on these ac-
counts were to be recorded in the
RCS demand schedules under the
respective r u b r i c s : " f a r m business,"
"non-farm business," and "family
l i v i n g . ' ' This three-fold division pro-
vided a framework w i t h i n w h i c h the
attempt was made to identify unusual
or large outlays which may have
been financed by loans. " I t was ex-
pected," the Committee have w r i t t e n ,
"that the bulk of the borrowings
would take place in most districts
and for most strata of cultivators
for expenditure on capital account
and for expenditure on durable con-
sumption goods or special occasions
of f a m i l y expenditure such as death'
marriage and other ceremonies, sick-
ness and l i t i g a t i o n . " (Survey Re-
port, p 402) The approach of the
Committee, therefore, was one cal-
culated to call to m i n d the individual
occasions for b o r r o w i n g ; the more
eventful moments of the year, one
might say. As contrasted w i t h an
effort to obtain an integrated picture
of the total credit needs of the fami-
lies under study, this might be
termed a discrete, almost atomistic,
approach.
CULTIVATORS AS ENTERPRENEURS
The one subject on which the
RCS schedules tried to get a f a i r l y
f u l l report was what the Committee
called " f a r m business" W i t h i n the
purview of " f a r m business" the RCS
included all the a g r i c u l t u r a l acti-
vities of every one of the sample
families which was found to be cul-
tivating land. Each cultivating fa-
m i l y was considered to be engaged
in the business of f a r m i n g , to be
operating an a g r i c u l t u r a l enterprise.
We read that the RCS was concern-
ed w i t h "private household enter-
prises engaged chiefly in the busi-
ness of a g r i c u l t u r e " or w i t h "the
private enterprise sector in r u r a l
I n d i a . " The amount of land culti-
vated and the number of plough
cattle owned are referred to as the
main constituents of a family's
"business resources" (Survey R''
port, pp 115 and 6 9 8 ) .
The type of questions which . the
RCS asked about cultivation follow-
 SPECIAL NUMBER JUNE 1960
ed the lines of the f a r m business
survey techniques as used in Eng-
l a n d and A m e r i c a . T h u s the I n -
tensive E n q u i r y schedules were
planned to specify and record cash
expenses of c r o p p r o d u c t i o n and
cash receipts f r o m disposal of a g r i -
c u l t u r a l produce d u r i n g the year
under study. T h e Committee of
D i r e c t i o n seem to have taken it f o r
granted that the most i m p o r t a n t
credit needs of r u r a l families were
those connected w i t h t h e i r " f a r m
business'' operations, a n d that f a r m
business c o u l d be isolated f r o m
other aspects of f a m i l y l i f e f o r pur-
poses of study. As a c o r o l l a r y they
assumed that a survey centered on
" f a r m business" transactions d u r i n g
a single year w o u l d y i e l d the data
r e q u i r e d f o r comprehending the
u n d e r l y i n g p r o b l e m s o f credit i n
the I n d i a n countryside. I t cannot
be emphasized too strongly that the
key to the character and results of
the RCS lies in the focus of the
Committee of D i r e c t i o n on the cre-
d i t requirements o f c u l t i v a t i o n con-
ceived as a business enterprise.
W i t h o u t exception, everyone i n
possession of a b i t of l a n d w h i c h
he cultivated q u a l i f i e d f o r treat-
ment by the RCS as a cultivator, a
man with a cultivated holding.
Everyone of these cultivators was
taken to be a f a r m business operator,
no matter whether he also engaged
in any other economic a c t i v i t y , no
matter h o w m u c h o f his w o r k i n g
t i m e was actually devoted to c u l t i -
v a t i o n , and no matter how m u c h of
his income or l i v e l i h o o d was deriv-
ed f r o m it. Thus if a man worked
in a g r i c u l t u r e one percent o f his
time or 100 percent, he was record-
ed as the operator of a cultivated
h o l d i n g ; if crop p r o d u c t i o n gave a
f a m i l y o f merchants a n insignific-
ant p a r t o f f a m i l y income, that
f a m i l y was nonetheless recorded as
a c u l t i v a t i n g f a m i l y . The Com-
mittee of D i r e c t i o n note the fact that
the " c u l t i v a t i n g f a m i l i e s " constituted
a n extremely m i x e d bag. A t the top
were well-off f o l k , engaged in a n u m -
ber of activities; along w i t h c u l t i -
v a t i n g some land they m i g h t have
been acting as merchants, money-
lenders, millowners. At the other
end there were masses of cultivators
who c o u l d not depend on their cul-
tivated h o l d i n g s ; they had to earn
their l i v i n g i n p a r t , " f o r the large
majority an important part," from
other activities, p r i n c i p a l l y w o r k -
i n g f o r wages f o r others. Regard-
THE ECONOMIC WEEKLY
i n g the m i l l i o n s and m i l l i o n s of f a r m business and f a m i l y l i v i n g , . . . "
small cultivators w i t h t i n y cultivat- (Survey Report, p 4 0 2 ) .
ed holdings, the RCS tells us that
S i m i l a r l y , the chapter o n " I n -
these "are largely p a r t - t i m e c u l t i -
vestment a n d Disinvestment" states
vators.... whose economy a p p r o x i - that the business a n d the domestic
mates ' m o r e to that of non-cultiva- economy of the cultivators are "so
tors... " (Survey Report, pp 887 m i x e d that it w o u l d be impossible
and 949.) to o b t a i n any clear idea of deficits or
surpluses unless f u l l details of
"FARM BUSINESS"—POOR GUIDE TO
f a m i l y l i v i n g were collected at the
CREDIT NEEDS
same t i m e as details of f a r m busi-
In the case of the smaller hold- ness". In p a r t i c u l a r , the Com-
ers, the RCS discovered that, on mittee conceded that they d i d not
the average, the receipts f r o m sale "go far enough, or almost not at a l l
of produce d i d not even, cover the i n t o stocks on hand, consumption
cash expenses of the so-called " f a r m d u r i n g the year in the f a m i l y or
business." L a r g e p r o p o r t i o n s of stocks retained for consumption at
those classified as " c u l t i v a t o r s , " the the end of the year". (Survey Re-
Survey Report states, " f o l l o w this port, p 7 6 5 ) .
occupation c h i e f l y f o r the retained Since very many of the " c u l t i v a -
receipts i n k i n d f r o m f a r m busi- t o r s " do not depend on c u l t i v a t i o n
ness...." P 8 2 6 ) . T h i s is another alone, the Survey Report tells us,
way of saying that these f a m i l i e s the approach to credit needs p r i -
produce p r i m a r i l y for their o w n m a r i l y t h r o u g h f a r m business is
consumption. Persons or families inadequate :
eating up their o w n output are not
" I n c o m e obtained f r o m f a r m i n g
engaged in, a g r i c u l t u r e as a "busi- forms a m i n o r p a r t of the total
ness/' Rather t h a n being "business- annual income of a substantial
m e n " or " a g r i c u l t u r a l entrepren- percentage of cultivators, and
eurs," they are s i m p l y g r o w i n g f o o d other sources of income have
so that they can have their d a i l y to be resorted to f o r meeting
meals. Insofar as these people are the m i n i m u m consumption needs
concerned, the RCS has had to ad- of the family by the majority
m i t that details o f " f a r m business" of cultivators. ( I t a l i c s added). F r o m
constitute no guide or at best a poor the p o i n t of view of the R u r a l Cre-
guide to their needs f o r credit. d i t Survey, the measurement of de-
The a p p r o a c h of the Committee ficits of f a r m business by itself
of D i r e c t i o n to the peasantry re- w o u l d not be, therefore, sufficient.
sembled that of a banker t o w a r d his T h u s w h i l e it m a y be i m p o r t a n t to
business clients. ( C f Dr H a r o l d H observe at w h a t size of h o l d i n g or
M a n n o n the R u r a l Credit Survey p r o d u c t i o n level deficits in agricul-
i n the I n d i a n Economic Review, V o l t u r a l business as such occurred, it is
I I I , N o 4 ( D e l h i , August 1 9 5 7 ) , p more important to know the sur-
80.) The Committee wanted to con- pluses and deficits resulting from
centrate on the creditworthiness of the total economic activity of the
the peasants' a g r i c u l t u r a l operations f a m i l y " . ( I t a l i c s a d d e d ) . (Survey
and t r i e d to p u t on the side the i n - Report, p 765)
numerable details o f f a m i l y l i v i n g T h i s is tantamount to saying that
and o f n o n - f a r m business. I n the the attempt to isolate f a r m business
event they f o u n d that "the business f r o m total f a m i l y economic activity
of the large b u l k of the small pro- proved u n r e w a r d i n g .
ducers in I n d i a , especially cultiva- BORROWING AS A B A L A N C I N G FACTOR
tors, cannot be easily separated It was further realized that neither
f r o m their expenditure o n f a m i l y debt nor b o r r o w i n g nor consumption
consumption account." B o r r o w i n g s were necessarily related to the eco-
f o r short-term a n d long-term "fa- nomic position of a f a m i l y in a
m i l y expenditure," the Committee p a r t i c u l a r year. T h e Survey Report
discovered, many times overshadow- advises us that the operation of the
ed b o r r o w i n g f o r investment or credit system can best be understood
current p r o d u c t i o n purposes. To in relation to levels of average ex-
a r r i v e at an understanding of the pectation of income as a whole. T h e
operations of the credit system, ac- standard of l i v i n g — or, as the
c o r d i n g to the Survey Report, it Survey Report puts i t , "the total
w o u l d have been necessary " t o take outlay on consumption goods a n d
account of the total operations of services d u r i n g a year" — t u r n e d
the cultivator i n r e l a t i o n b o t h t o out to be a function, " n o t o n l y of
952
 THE ECONOMIC WEEKLY
the income of the p a r t i c u l a r year
but is also significantly related to
the levels of income d u r i n g past
years", (p 525.) Peasant families —
all families, in fact — get accus-
tomed to a certain level of l i v i n g .
They go on t r y i n g to live at that
level, whether or not in any given
year their total resources are suffi-
cient. W h e n they f a l l short, they
borrow.
For peasant families, the Survey
suggests, b o r r o w i n g may p l a y the
role of an overall balancing factor :
" I t is the total requirements whe-
ther on p r o d u c t i o n or consumption
account, whether i n k i n d o r i n cash,
of the business and f a m i l y needs of
the cultivator or non-cultivator that
have to be matched w i t h the total
receipts i n cash o r i n k i n d , f r o m
whatever sources, obtained by the
f a m i l y . I n this p i c t u r e o f the inte-
grated economy of the business and
consumption u n i t , b o r r o w i n g m a y
w e l l be looked upon as a balancing
factor, so that the gap between re-
ceipts and requirements of expendi-
ture is made up, to the extent
possible and for the periods requi-
red, by acts of b o r r o w i n g " . (Survey
Report, p 2 6 2 ) .
In this case, the Survey Report con-
tinues, the announced occasion or
purpose of b o r r o w i n g m a y be " i r r e -
levant" or w i t h o u t special signifi-
cance. Since, however, the schedules
were designed to emphasize p a r t i -
cular occasions for b o r r o w i n g , they
d i d not y i e l d the i n f o r m a t i o n needed
to understand the f u n c t i o n w h i c h
b o r r o w i n g actually f u l f i l l e d . ' We
read in the Survey Report that :
" I t is not, of course, possible f r o m
the data collected by us d u r i n g the
Survey to measure d i r e c t l y the ex-
tent to w h i c h , or p o i n t precisely to
the districts i n w h i c h , b o r r o w i n g
d u r i n g the year m a y be said to have
played the role of a balancing
factor" (Survey Report, p 5 2 8 ) .
In 1945 the A g r i c u l t u r a l Finance
Sub-Committee had already point-
ed out in their Report that an
"occasional" approach to borrow-
i n g w o u l d be inadequate : " I t is
obvious that the purposes or occa-
sions of b o r r o w i n g w h i c h are
capable of being ascertained in a
fact finding investigation p o i n t
merely to the p a r t i c u l a r c i r c u m -
stances in w h i c h p a r t i c u l a r debts
were contracted. T h e y give i n d i -
cations of the o r d i n a r y needs or
the e x t r a o r d i n a r y circumstances
on account of w h i c h the c u l t i v a t o r
In order to assess the role of bor-
r o w i n g as a b a l a n c i n g factor, the
Committee of D i r e c t i o n w o u l d have
had to take an approach exactly op-
posite to the one they chose. They
w o u l d have h a d to look f o r total
economic a c t i v i t y and total economic
position of the families studied
rather than for p a r t i c u l a r instances
i n w h i c h f a r m business operations
m i g h t give rise to credit needs.
"CULTIVATED HOLDING" AS U N I T OF
F A R M BUSINESS
The focus on f a r m business led
the Committee to take as the basic
unit for data-gathering and analysis
not the r u r a l f a m i l y itself but the
parcel or pareels of land w h i c h each
family cultivated. As the local
counterpart of the " f a r m " , the u n i t
of a g r i c u l t u r a l enterprise on w h i c h
the foreign " f a r m business" surveys
centre, the RCS took the " c u l t i v a t e d
h o l d i n g " . T h i s was defined to i n -
clude the land operated by a f a m i l y ,
whether owned or rented i n , but to
exclude any other f a m i l y l a n d w h i c h
the f a m i l y d i d not themselves cul-
tivate.
A n y plot of land larger than a
mere garden patch (no specific c r i -
terion appears to have been set)
qualified as a " c u l t i v a t e d h o l d i n g " .
These "cultivated h o l d i n g s " were
crudely ranked by size in physical
acres regardless of q u a l i t y of soil or
adequacy of water supply. Since the
r a n k i n g left out of account land
owned but not cultivated, a f a m i l y
of large holders w h o w o r k e d o n l y
a small part of their l a n d and rent-
ed out the rest m i g h t well be found
in the list below some of their larg-
er tenants. Nonetheless this rank-
ing served as the basis upon w h i c h
the c u l t i v a t i n g families were d i v i d e d
into ten equal groups ("deciles" or
"strata") in terms of w h i c h the
data were c o m p i l e d and analysed.
had to seek financial help. By
themselves they do not constitute
the causes of either the p a r t i c u l a r
debt or the general fact of indeb-
tedness. An e n q u i r y i n t o the
causes of indebtedness w o u l d have
to travel m u c h beyond the investi-
gation of each occasion of borrow-
ing. It w o u l d necessitate a T h i s has l o n g been an outstanding
thorough study of a l l aspects of
the a g r i c u l t u r i s t ' s l i f e " . Report of
the Agricultural Finance Sub-
committee appointed by the Gov-
ernment of India on the recom-
mendation of the Policy Committee
on Agriculture' Forestry and
Fisheries (New Delhi, 1945),
p 13.
953
SPECIAL NUMBER JUNE 1960
It was apparently believed that
differences in scale of f a r m business
operations, in credit needs, in total
debt etc w o u l d by and large reflect
differences in size of the "cultivated
holdings".
SIGNIFICANCE OF OWNERSHIP
HOLDING
W h e n they came to interpret the
data, however, the Committee of
D i r e c t i o n were forced to the chasten-
i n g conclusion that the "cultivated
h o l d i n g " was of severely l i m i t e d
use for the understanding of bor-
r o w i n g . In the words of the Survey
Report :
". . . the cultivated h o l d i n g is sig-
nificant chiefly for short-term
production credit. I n relation t o
medium-term and especially long-
t e r m production credit, o n l y in a
l i m i t e d number of cases w o u l d
b o r r o w i n g operations depend on
the size of the cultivated h o l d i n g .
They m i g h t depend m u c h more
closely on the size of the owner-
ship h o l d i n g / ' '
" O w n e r s h i p h o l d i n g " , as distin-
guished f r o m cultivated h o l d i n g ,
refers to land h e l d by f a m i l y in f u l l
ownership rights. People are much
more l i k e l y , the Survey Report
slates, to make lasting investments
i n a g r i c u l t u r a l land w h i c h they own,
rather than in l a n d w h i c h they rent
f r o m others. ( P . 6 5 7 ) .
T h e Survey Report contains a dis-
cussion of debts in relation to c u l t i -
vated holdings. But for many
purposes, the Committee go on to
state, "the more i m p o r t a n t relation
w o u l d be that of debt w i t h the assets
of the c u l t i v a t o r ' . Almost every-
where, they note, owned l a n d con-
stitutes the most important single
item of assets, it is also, they i n d i -
cate, the most stable asset. Owned
l a n d is the basis for c r e d i t w o r t h i -
ness. In the language of the R C S :
"the value of owned land w o u l d also
p r o b a b l y represent the measure in
relation to w h i c h the credit w o r t h i -
ness of most c u l t i v a t i n g families was
judged by credit agencies." (Survey
Report, pp 115 and 137. See also
p 132 and p 564.)
feature of the r u r a l credit position
' Survey Report, p 115. Near the
end of this same volume it is stat-
ed : " T h e requirements for me-
d i u m - t e r m and long-term credit
are comparatively larger than
those for short-term c r e d i t . " (P
1012)
SPECIAL NUMBER JUNE 1960 THE ECONOMIC WEEKLY

954
T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960

in India. A s they say i n the N o r t h , unchanged as f o l l o w s : of w h i c h are the c u l t i v a t e d h o l d i n g

"a man's haisiyat is his land". and livestock". (Survey Report,
2.1 Do you o w n any l a n d ?
A f t e r a l l , it is not a " c u l t i v a t e d P 115)
h o l d i n g " w h i c h w a l k s over t o the 2.2 If so. what is its area?
T h u s the C o m m i t t e e of D i r e c t i o n
moneylender's v e r a n d a h a n d seeks
2.3 W h a t is the land revenue you obtained and held i n t h e i r hands
to o b t a i n a l o a n . Rather it is a
pay to G o v e r n m e n t ? data on the most i m p o r t a n t assets
peasant w h o comes f r o m a f a m i l y
of t h e i r o r i g i n a l sample of 127,000
w h i c h m a y have been d e a l i n g w i t h 2.4 H a v e y o u leased out any part families. In their preoccupation w i t h
the moneylender a n d the m o n e y l e n d - of l a n d o w n e d by y o u ? " c u l t i v a t e d h o l d i n g s " , they p u t these
er's f o r e f a t h e r s f o r one or more
2.5 If so. what is its area? data aside a n d never made use of
generations. The moneylender is
them. Later, when they f o u n d that
l i k e l y to know a good deal about
2.6 Have you taken any land on for m a n y purposes data on assets
the peasant's f a m i l y , to have a f a i r
lease? were m o r e i m p o r t a n t t h a n data o n
idea about the v a r i o u s f a m i l y m e m -
" f a r m business", they had t o make
hers and what they are d o i n g . Al- 2.7 If so. what is its area?
do w i t h materials f r o m the intensive
t h o u g h the l o a n m a y be extended to
2.8 Have y o u given possession enquiry p e r t a i n i n g o n l y to 9,000
one m e m b e r , the m o n e y l e n d e r , in
to a c r e d i t o r u n d e r u s u f r u c - families.
effect, is g i v i n g c r e d i t to the f a m i l y .
t u a r y m o r t g a g e a n y part of
In d o i n g so, the moneylender gives PRICE OF POLICY ORIENTATION
land owned by y o u ?
heavy w e i g h t to the s o l i d assets of
the f a m i l y , a m o n g w h i c h there is 2.9 IT so. what is its area? It may be that the Committee's
n o t h i n g so g o o d as f u l l y owned land preoccupation i n 1951-52 w i t h " c u l -
that the f a m i l y , if need be, can 2.10 Have you in y o u r possession tivated h o l d i n g s ' ' bore some r e l a t i o n
pledge a n d alienate. T h e heart of as c r e d i t o r under u s u f r u c t u - to an i m p o r t a n t change in p o l i c y then
the r u r a l credit structure in I n d i a is a r y mortgage any l a n d ? occurring in agricultural credit in
the r e l a t i o n s h i p between the c r e d i t o r Bombay. At that t i m e the Bombay
2.11 If so. what is its area?
and the family-cum-family assets. Slate Cooperative Bank, and the
As against these realities, the Com- 2.12 T o t a l area under y o u r c u l t i - B o m b a y cooperative movement in
mittee of D i r e c t i o n chose to concent- vation (including current general, were e x p e r i m e n t i n g w i t h a
rate on an abstraction called the fallow} d u r i n g the current shift away f r o m credit l i n k e d w i t h
"cultivated holding". I n t h e i r pre- agricultural year? assets ( o w n e r s h i p h o l d i n g s ) to cre-
o c c u p a t i o n w i t h this alleged " u n i t dit linked w i t h production (cultivated
2.13 N u m b e r of plough cattle
o f f a r m business", the C o m m i t t e e holdings). In this they had the
owned
never even bothered to ask on any blessings of the Reserve Bank. The
of t h e i r schedules the size or type 2.14 Stratified serial number R u r a l C r e d i t Survey of the Reserve
of the f a m i l y , the n u m b e r of f a m i l y Bank was l a i d out in such a way as
members, the n u m b e r of a d u l t s , or Technical Report, p 965. to f a c i l i t a t e the collection of data
the n u m b e r o f w o r k i n g members—- p e r t a i n i n g to c u l t i v a t i o n , c u l t i v a t e d
C l e a r l y , the RCS collected data on
s u r e l y matters of significance f o r h o l d i n g s , and crop loans. One of the
" o w n e r s h i p h o l d i n g s " against Ques-
b o r r o w i n g and lending. chief recommendations that emerg-
tions 2.1 and 2.2 of the general
ed f r o m the R u r a l Credit Survey was
schedule. D e t a i l e d i n f o r m a t i o n on
OWNERSHIP DATA NOT TABULATED precisely a shift of this nature on
the leasing and m o r t g a g i n g of l a n d
The Survey Report states that, an A l l - I n d i a basis: a s h i f t f r o m the
must have been obtained f r o m the
despite the f u n d a m e n t a l i m p o r t a n c e "asset-nexus"" to the " p r o d u c t i o n -
subsequent Hems. W h a t , then, is
of the "ownership holdings" in nexus". In planning their Survey
the m e a n i n g of the assertion, quoted
terms of investment a n d as a basis perhaps the Committee of
above, that the general schedule
f o r b o r r o w i n g ' these cannot be as- yields "no i n d i c a t o r of relative eco- Direction allowed themselves to be
c e r t a i n e d from the general schedule n o m i c p o s i t i o n other t h a n the size c a r r i e d away by t h e i r v i s i o n of w h a t
data p e r t a i n i n g to 127,000 f a m i l i e s . o f cultivated h o l d i n g ? " Incredible r u r a l credit ought to be or become,
" F o r the f a m i l i e s investigated using as it may s o u n d , the f a c t is that at the expense of g e t t i n g a balanced
the General S c h e d u l e " , we r e a d , data on o w n e r s h i p h o l d i n g s (along account of the s t r u c t u r e of r u r a l
"there is no indicator of relative w i t h the leasing a n d mortgaging credit as it a c t u a l l y was.
economic p o s i t i o n other than the size d a t a ) were collected but not tabulut- A f t e r all the field w o r k was over,
of cultivated h o l d i n g . " Regarding ed. Kef e r r i n g to the general sche- the Committee f o u n d that the sum
the r e l a t i o n of debt w i t h the assets d u l e questions on l a n d , the Survey- total of q u a n t i t a t i v e data collected
o f the c u l t i v a t o r , i t i s asserted: " I n - Report states that " t h e m a i n objec- d i d not a d d up to a sufficient basis
f o r m a t i o n on this p o i n t is available tive of the questions r e g a r d i n g hold- f o r the analysis of the credit needs
o n l y t h r o u g h the intensive e n q u i r y . " ' ings was to o b t a i n estimates of the of peasant f a m i l i e s . T h e i r materials
{Survey Report, pp 08 and 115) size of c u l t i v a t e d h o l d i n g s , so that were inadequate f o r d e s c r i b i n g either
Since the p o i n t is of p a r a m o u n t its relation to size of recorded trans- total economic a c t i v i t y or overall
s i g n i f i c a n c e , let us t u r n to the general actions such as b o r r o w i n g s a n d re- assets p o s i t i o n of the peasant c u l t i -
schedule. I t begins w i t h a n i n t r o - payments m i g h t be examined." The vators. F o r the peasant sector the
d u c t o r y g r o u p o f questions w h i c h i n t e n t i o n , it is e x p l a i n e d , was " n o t C o m m i t t e e c o u l d asses.neither stocks
locate and i d e n t i f y the household, its to e n q u i r e i n t o the assets, i e, the nor flows. The Committee were,
head, caste and o c c u p a t i o n . Then capital w o r t h of the cultivating therefore, in no position to deal with
follows a b l o c k of 14 questions per- f a m i l y , b u t i n t o the size of its busi- such complex topics as investment
t a i n i n g t o l a n d w h i c h are r e p r o d u c e d ness resources, the m a i n constituents a n d disinvestment, capital f o r r n a t i o n

955
 SPECIAL NUMBER JUNE 1960
savings a n d deficits, shifts in income
and flow of funds. T h i s is in 'fact
conceded in the chapters of the Sur-
vey Report devoted to these topics'
T h e hundreds o f pages i n w h i c h
these subjects are discussed lead
nowhere.
UNSUITABLE CONCEPTUAL
FRAMEWORK
The RCS failed to get the data
needed for an understanding of r u r a l
credit because its conceptual frame-
w o r k was unsuited to the I n d i a n
countryside. The f a r m business ap-
proach w h i c h the Committee of
D i r e c t i o n adopted had been develop-
ed in the U K and the U S A where
the economic organization of a g r i -
culture is quite different. In those
countries f a r m i n g is c a r r i e d on m a i n -
ly as a business. Regular accounts
are maintained, and p r o f i t or loss
calculated. The farmers produce
chiefly for the market. Even in the
case of food crops the amounts w h i c h
f a r m families keep for home con-
sumption are usually t r i v i a l as com-
pared w i t h total p r o d u c t i o n . T h e
usual practice i n A m e r i c a n f a r m
business studies has been to ignore
these retentions f o r home use.
I n I n d i a , b y contrast, food crops
are g r o w n p r i m a r i l y to feed the
growers themselves. It has been
estimated that only about one-
quarter to one-third of I n d i a ' s rice
and wheat enters the m a r k e t , ' T h e
amounts w h i c h are kept by the peas-
ants for their o w n food represent
the great b u l k of the product. Even
among agriculturists who n o r m a l l y
sell part of t h e i r output, o n l y a
m i n o r i t y may he characterized as
entrepreneurs or businessmen.
For the great m a j o r i t y of I n d i a n
peasants, f a r m i n g is not a business
entered into for p r o f i t b u t a here-
d i t a r y occupation c a r r i e d on chiefly
w i t h f a m i l y labour for f a m i l y suste-
nance. T h e y keep no books and
reckon no costs. An a g r i c u l t u r a l
year is good if something is left over
at the end. Peasant f a r m i n g in I n d i a
is i n e x t r i c a b l y woven i n t o the fab-
ric o f peasant f a m i l y l i f e . To rip
cultivation out of its f a m i l y context
and to pretend that it is business
enterprise is to distort r u r a l r e a l i t y
' Cf, Government of I n d i a . First
Report of the National Income
Committee. (New Delhi, A p r i l .
1951 . p 3 0 ; also. Government of
I n d i a , M i n i s t r y of Food and A g r i -
culture, Report of the Food grains
Enquiry Committee ( N e w Delhi,
1957). "pp 188-89 and 44-45.
in India.
Q u a l i t y o f the D a t a
The method of field w o r k upon
w h i c h the RCS relied almost exclu-
sively was that of o r a l i n t e r v i e w .
For this purpose, as we have seen,
a series of schedules were prepared
and taken a r o u n d i n the sample v i l -
lages. AH data obtained by inter-
v i e w i n g are subject in one degree or
another to what has been called the
" e r r o r of response." T h i s is the
possibility that the entry made by
the investigator may not represent
the true answer to the questionnaire
item in respect of the person being
interviewed.
There are fields in w h i c h the er-
rors of response may be expected to
he very large as, say, in connection
w i t h sensitive subjects on w h i c h
questions may be resented, e.g., boot-
l e g g i n g , selling o p i u m , sex relations,
g a m b l i n g , tax evasion, etc. Other
enquiries that may be expected to
give rise to substantial errors of ob-
servation are those i n v o l v i n g compli-
cated calculations, e g, asking auto-
mobile owners to recall and appor-
t i o n their annual costs f o r mainte-
nance, repair, depreciation, and re-
placement. Further, there are enqui-
ries w h i c h p u t questions for w h i c h
the experience of the respondent has
not prepared h i m . It is not that
these are necessarily c o m p l e x ; it is
s i m p l y that the respondent may not
know what to make of them. In
communities w i t h o u t clocks respond-
ents should not be asked to state in
exact n u m e r i c a l terms how many
hours a day they w o r k ' Finally,
any battery of questions that is very
l o n g runs the risk of so w e a r y i n g
the respondent that he may e n d up
by g i v i n g any sort of answers what-
soever, so long as he can get the
interviewer to go away and bother
somebody else.
E R R O R S OF R E S P O N S E
The RCS i n v i t e d large e r r o r s of
response on each of the counts just
listed. In the first place, debt is
a p a i n f u l subject, not l i k e l y to be
discussed easily or c a n d i d l y w i t h
anyone, let alone casual strangers
c a r r y i n g f o r m i d a b l e questionnaires.
Quite a significant p r o p o r t i o n of
creditor-debtor relations in village
India are on the fringe of the law,
or pay no heed to the law. Such
relations are often f u r t i v e and sur-
reptitious. Even when they are open
and flagrant, the peasant may not
be prepared to t a l k about them
w i t h outsiders. To the peasant, the
956
THE ECONOMIC WEEKLY
moneylender is l i k e l y ' to be "at once
a necessity a n d a terror".* T h e
peasant m i g h t l i k e t o curse h i m , b u t
may f i n d i t wiser t o kep m u m .
Some of the most i m p o r t a n t ques-
tions were so couched that accurate
answers could h a r d l y have been ex-
pected. An example of a c o m p l i -
cated i t e m r e q u i r i n g the respondent
to make a series of mental compu-
tations is f o u n d in the general sche-
dule. U n d e r the b r o a d topic of
" c a p i t a l e x p e n d i t u r e " the heads of
127,000 families were asked how
m a n y rupees they had spent d u r i n g
the preceding twelve months on
c a p i t a l expenditure i n n o n - f a r m
business' T h e recall p e r i o d was
l o n g . T h e p o i n t where f a r m i n g
gives way to " n o n - f a r m business"
m a y be obscure, as in the case of
converting sugarcane j u i c e into gur
(unrefined s u g a r ) . T h e distinction
between capital expenditures and
other expenditures-—say in renovat-
i n g a wooden l o o m — i s delicate. It
is not s u r p r i s i n g , therefore, that only
5 per cent of all those interviewed
reported any capital expenditure
whatsoever on non-farm business.+
U n d e r the r u b r i c of capital invest-
ment in a g r i c u l t u r e , the head of each
household was asked how many
rupees he had spent d u r i n g the pre-
ceding twelve months on "construc-
t i o n of f a r m houses, cattle sheds,
etc." F u r t h e r along in the same
schedule, under the r u b r i c , " f a m i l y
expenditure", he was asked how
many rupees he had spent d u r i n g
the preceding twelve months on the
"construction and repair of residen-
t i a l houses and other b u i l d i n g s " .
But how was he to distinguish ex-
penditure under this head f r o m the
previous question ( " c o n s t r u c t i o n of
f a r m houses etc.") when, as is so
' A l t h o u g h it pertains to X V I t h
Century England, there is much of
comparative interest in the mast-
e r l y i n t r o d u c t i o n by R H Tawney
to his edition of Thomas Wilson's
Discourse upon Usury' London,
Bell and Sons. 1925. See in par-
ticular, pp 17-30.
+ Survey Report, p 550. It is not
easy to follow the instructions to
the field staff for the recording of
this item. As reproduced in the
Technical Report, these r e a d : " A n y
f o r m of business expenditure in-
c u r r e d on current account as well
as purchase of supplies f o r re-sale
or speculation purposes should be
entered . . . " Technical Report,
p 13.
 THE ECONOMIC WEEKLY
often the case, h i s f a r m house, cattle
shed, and residential house were one
and the same s t r u c t u r e ? ' '
A g a i n , the heads of households
were asked in the Intensive E n q u i r y
schedules to state t h e i r cash receipts
f r o m sale of various types of crops
and livestock products. T h i s sort of
question w o u l d have presented l i t t l e
difficulty to the peasants i f , as in
large u r b a n shops, they made out
sales slips for each transaction and
kept regular business accounts.
I n d i a ' s peasants, needless to say, fol-
low no such practise. Those who
do sell crops, sell them at different
times of the year, in different am-
ounts. T h e r e m a y be relatively
large sales after the harvest of the
p r i n c i p a l crop, smaller sales after
the harvests of the lesser crops, i r r e -
gular sales of m i l k , eggs, p o u l t r y ,
f r u i t , vegetables, etc. T h e peasant's
style of l i f e does not put h i m in a
position to answer quantitative ques-
tions about cash sales. T h e best he
r a n do, under persistent p r o d d i n g
f r o m an investigator, is to indulge in
plausible guesswork.
BOOK-SIZE QUESTIONNAIRE
The most manifest of the sins of
the RCS was in regard to the n u m -
ber and to the length of their sche-
dules and questionnaires. If the
blank schedules, etc, were a l l to be
bound together between one set of
rovers, they would fill 100 pages of
an o r d i n a r y octavo-size volume. N o t
all the questions were put to any one
f a m i l y ; about h a l f of them were put
to each of the 9,000 families covered
by the intensive e n q u i r y and a n u m -
ber of schedules were filled up a
second t i m e on a r e t u r n visit. Hence.
about 66 pages of octavo size were
used up for each of these 9,000
families.
W i t h regard to capital expendi-
ture in agriculture the Survey Re-
port rails attention to another source
of weakness in the data. The RCS
treated capital expenditure i n agri-
culture under three m a i n heads;
purchase of land, purchase of live-
stock, and "other capital expendi-
ture in a g r i c u l t u r e " . This last
g r o u p included expenditure on land
reclamation, b u n d i n g , wells and
other i r r i g a t i o n resources, new orch-
ards, purchase of implements and
' ' T h e general schedule used in the
Rural Credit Survey is reproduced,
along w i t h blank specimens of a l l
the other schedules and question-
naires, in the Technical Report,
pp 965-1014.
machinery, f a r m b u i l d i n g construc-
t i o n , and miscellaneous. I n the
actual returns, l a r g e r sums were re-
corded under "other capital expen-
d i t u r e s " than under either purchase
of l a n d or purchase of livestock.
The q u a l i t y of the data for the
various items treated under "other
capital expenditure i n a g r i c u l t u r e "
is indicated by the f o l l o w i n g passage
in the Survey Report :
" T h o u g h f a i r l y elaborate ins-
tructions were issued to Investi-
gators r e g a r d i n g the coverage of
various items or groups of items
there was i n e v i t a b l y some varia-
t i o n in the i n t e r p r e t a t i o n of these
instructions. W h i l e i n some i n -
stances the Investigators t r i e d to
cover even the smallest expendi-
tures and obtained reports f r o m a
very large p r o p o r t i o n of families,
in others the r e p o r t i n g seems to
have been confined to o n l y expen-
d i t u r e of a large size, and is,
therefore, reported f o r only a small
p r o p o r t i o n of families. V a r i a t i o n s
from district to district in the
p r o p o r t i o n s o f families i n c u r r i n g
expenditure i n r e l a t i o n t o p a r t i -
cular items may be due p a r t l y to
such v a r i a t i o n i n i n t e r p r e t a t i o n , "
(Survey Report, p 638.)
S i m i l a r l y , the returns for parti-
cular groups of f a m i l y expendi-
ture, the ..Survey Report states,
show large and i r r e g u l a r variations,
especially in regard to the p r o p o r t i o n
o f families r e p o r t i n g expenditure i n
various districts :
" I n all items, i n c l u d i n g items
r e l a t i n g to expenditure on cere-
monies, there appears to have
been some v a r i a t i o n in interpreta-
t i o n of the scope of the questions.
At one extreme, almost 100 per
cent of the respondents in p a r t i -
cular districts were reported as
h a v i n g i n c u r r e d expenditure on
many of the items; at the other
extreme, reports of o n l y exception-
a l l y large expenditures were evi-
dently entered in the general sche-
dule o w i n g to a somewhat n a r r o w
interpretation of the scope of the
items." (Survey Report, pp 402-
03.)
CROP OUTPUT ESTIMATE
W h e n schedule design flouts the
first principles of the survey method,
large errors of response may be ex-
pected. T o t a l l i n g the returns may
cumulate the errors. Something of
this sort seems to have happened
w i t h the RCS A l l - I n d i a estimate of
the "gross value of o u t t u r n of c r o p " .
957
SPECIAL NUMBER JUNE 1960
" V a l u e of p r o d u c e " data were ob-
tained o n l y f r o m the 9,000 intensive
e n q u i r y families. T h e RCS attached
considerable i m p o r t a n c e to the calcu-
lation of a figure in rupees for the
total value of crop o u t t u r n d u r i n g
the year f o r each of these families.
For purposes of analysis, the inten-
sive e n q u i r y f a m i l i e s were g r o u p e d '
by "value of gross p r o d u c e " as w e l l
as by number of acres c u l t i v a t e d .
The value of produce figure was
taken by the RCS as a more refined
measure of the size of " f a r m busi-
ness" than the cultivated acreage
figure.
W e i g h t i n g , averaging, and inflat-
i n g the sample data to national p r o -
portions, the Committee emerged
w i t h a 1951-52 A l l - I n d i a figure f o r
gross value of crop produce of Rs
2,921 crores (or, in terms of thous-
ands of m i l l i o n s , of Rs 2 9 . 2 ) . (Sur-
r e y Report, pp 1064-66.) As ag-
ainst their own figure, the Commit-
tee cite the figure subsequently ob-
tained by the N a t i o n a l Income Com-
mittee of the Government of I n d i a .
T h i s official figure, they had expect-
ed, w o u l d be q u i t e close to t h e i r
o w n . T h e N a t i o n a l Income Com-
mittee figure f o r gross value of out-
put of crops in 1951-52, however,
turned out to be Rs 4,887 crores (or,
in terms of thousands of m i l l i o n s ,
Rs 4 8 . 8 ) . T h u s the National I n -
come Committee figure is 67 per cent
higher than the RCS estimate. T h e
RCS Committee of D i r e c t i o n take
the higher figure as more authorita-
tive than their o w n . T h u s we read
in the Survey Report that the RCS
underestimation was large, say " o f
the order of 50 per cent of the re-
ported value of gross produce.. . ."
( p 824)
REASONS FOR D I S C R E P A N C Y
In discussing the reasons for the
discrepancy the Committee of Direc-
tion note that crop p r o d u c t i o n was a
sensitive subject in 1951-52. In
most of the States of I n d i a there was
at the time one or another type of
governmental control of sugar and
foodgrains: procurement, price con-
t r o l , r a t i o n i n g , or a combination of
these The effectiveness of these
controls v a r i e d ; so d i d the degree of
b l a c k m a r k e t i n g . In this context, the
Committee observe, the peasantry
may have understated the physical
quantities of 'foodstuffs produced.
Furthermore, the prices w h i c h the
peasants reported to the investigators
may have been lower than the .ones
at w h i c h they really sold. There was
SPECIAL NUMBER JUNE 1960 THE ECONOMIC W E E K L Y

958
THE ECONOMIC WEEKLY
no attempt at objective verification,
whether of acreage, or yields, or of
r u l i n g prices.
In the second place it is difficult
to secure i n f o r m a t i o n on all crops at
one t i m e . The Committee report
that the RCS investigators concen-
trated on the m a i n crop, whether
food grains or i n d u s t r i a l crops l i k e
cotton and sugarcane' T h e m i n o r
crops in each area were under-
emphasised or even altogether neg-
lected. T a k e n as a g r o u p , however,
these m i n o r crops account for 25 per
tent or more of the value of total
crop p r o d u c t i o n .
Furthermore, as we have noted
above, the I n d i a n peasantry do not
keep p r o d u c t i o n records. It was too
m u c h to expect them to rattle off de-
t a i l after detail of crop acreage,
y i e l d , and scle price. Lastly, the
huge sets of "books" to be filled up,
could not help but be endlessly wear-
y i n g both to the peasant and to the
investigators. W h a t else could the
field men do but gloss over details
and move on?
Reflection in advance on these
matters surely should have stayed the
hands of the Committee of D i r e c t i o n .
W h i l e some matters can be probed
f r u i t f u l l y by oral interview, there
are others w h i c h require direct, phy-
sical observation. Data for many
of the items included in the RCS
questionnaires could have been ob-
tained only by stationing investiga-
tors w i t h small groups of households
throughout the p e r i o d of e n q u i r y .
Furthermore, to secure reliable i n -
f o r m a t i o n , those investigators w o u l d
have needed t h o r o u g h t r a i n i n g as
well as f a m i l i a r i t y w i t h the subject
matter in its local setting. T h i s type
of w o r k , of course, could scarcely
have been c a r r i e d out on an a l l - I n d i a
scale in a single survey l i m i t e d to a
single year.
Design of the Survey
We may recall that, according to
the instructions f r o m the Reserve
Bank, the Committee of D i r e c t i o n
were to plan an A l l - I n d i a Survey
w h i c h w o u l d cover all a g r i c u l t u r a l
strata in representative parts of the
country. T h e selection of units to
be studied was made in three stages.
T h e first stage was the selection of
75 out of I n d i a ' s 302 administrative
districts. In the second stage, 600
villages were selected, 8 in each of
the 75 sample districts. Every
f a m i l y in these 600 villages, 127,000
families in a l l , was canvassed w i t h
the general schedule. At the t h i r d
stage, 15 families were selected f r o m
the total number of c u l t i v a t i n g f a m i -
lies i n each of the 600 sample v i l -
lages. In this way, 9,000 families
were chosen f o r detailed study by
means of the intensive schedules.
The purpose of conducting
sample survey on an A l l - I n d i a scale
is obviously to o b t a i n A l l - I n d i a data.
It is only reasonable to assume that
what the Reserve Bank expected
f r o m the RCS as a basis f o r formu-
lating national r u r a l credit p o l i c y
were, firstly, A l l - I n d i a results and,
secondly, breakdowns for the major
regions. As we have noted, the
Committee o f D i r e c t i o n reported i n
December, 1952, that they were pre-
p a r i n g A l l - I n d i a and regional tables.
As tabulation and analysis pro-
ceeded, however, the Committee of
D i r e c t i o n seem to have lost confi-
dence in the representative nature
of the data w h i c h had been collected.
They came to the conclusion that
their materials could not be used to
make v a l i d estimates cither for I n d i a
as a whole or for any major region
of the country. T h e data, we read
in the Summary p r i n t e d in 1955.
"are representative of only the selec-
ted units of the sample". (Summary
of Survey Report, 1955, p 4.)
"PECULIAR NATURE OF SAMPLE
Instead of A l l - I n d i a averages or
proportions, the text tables in the
Survey Report give figures for "the
75 districts taken together".
the tables given at pp 293, 533, 550
and 5 7 1 ) . Alternatively, we find
innumerable frequency distributions
of the 600 sample villages or of the
75 districts. The Committee, h o w '
er, n o t i f y us at. the outset that "in
presenting a frequency d i s t r i b u t i o n
of the 75 districts in respect of any
character measured, such as o u t '
standing debt, no c l a i m is made that
the d i s t r i b u t i o n of the 302 districts
from w h i c h the sample was d r a w n
w o u l d show the same pattern. T h i s
is due to the peculiar nature of our
sample N o t w i t h s t a n d i n g the
largeness of the s a m p l i n g propor-
t i o n , namely, one in four, and the
fact that the sample covered a l l tracts
of the country, it w o u l d be w r o n g to
assume that the pattern of d i s t r i b u t i o n
for the country as a whole is accu-
rately depicted in the d i s t r i b u t i o n of
the sample." (Survey Report, p 1 1 ) .
S i m i l a r disclaimers are issued ag-
ainst t a k i n g the findings f r o m the
eight villages in any district as re-
presentative of a l l villages in that
district. We are t o l d that "the dis-
959
SPECIAL NUMBER JUNE 1960
trict data mean, f o r a l l purposes for
w h i c h the data were collected, the
data for the villages in the sample,"
(Survey Report, p 9 ) . Even more
forceful disclaimers regarding the
representative character of the data
a are made w i t h respect to States and
regions larger than States.
The Committee of D i r e c t i o n , in
fact, w o u l d have us believe that to
get representative data was not one
o f their p r i m a r y aims. "[Our]
m a i n objective", they have w r i t t e n ,
"was a study of conditions, not neces-
sarily of areas identified w i t h cer-
tain names or w i t h full areas but
w i t h samples of v a r y i n g conditions
throughout the country. .. " {Sur-
vey Report, p 1 0 ) . The Survey was
planned, they tell us, "not w i t h a
view to o b t a i n i n g estimates for the
country as a whole, of size of aver-
age outstanding debt, b o r r o w i n g s or
repayments, but was directed chiefly
towards o b t a i n i n g an idea of the
w o r k i n g of the a g r i c u l t u r a l credit
system in regions representative of
ail types of conditions existing in
the c o u n t r y " . (Survey Report, p
1 6 2 ) . The sample of districts, we
are told, was d r a w n "not particular-
ly w i t h a view to m a k i n g v a l i d
estimates for the .102 districts as a
whole" (Survey Report p 1 1 ) .
DRAWING OF SAMPLE DISTRICTS
The method by w h i c h the sample
of districts was d r a w n is rather obs-
cure. In a progress report made in
'Cf.
A p r i l , 1952, tile Committee of Direc-
tion informed the Reserve Hank that
a stratified random sampling proce-
dure had been followed.
" F o r the purposes of the sur-
vey, the whole country was d i v i d -
ed into a number of 'homogene-
ous' geographical regions, on the
basis, firstly, of the preponderance
or otherwise of cash crops and,
secondly, of the percentage of area
under i r r i g a t i o n . A certain num-
ber of districts was then selected
from each region on the r a n d o m
sampling m e t h o d "
Subsequently, however, in the
authoritative Summary Report (pub-
lished in 1955) no statement was
made on how the districts
were selected. T h i s is puzzling, all
' Reserve Bank of India, Standing
Advisory Committee on A g r i c u l t u -
ral Credit Proceeding' of the Se-
cond Meeting, held in Bombay
on 24th and 25th April 1952
(Bombay. Reserve Bank. 1952),
p 34.
 SPECIAL NUMBER JUNE 1960
the more so since the mode of selec-
t i o n of the sample villages is des-
c r i b e d in precise statistical langu-
age as " o n the r a n d o m s a m p l i n g
basis w i t h p r o b a b i l i t y of selection
p r o p o r t i o n a l to the p o p u l a t i o n of
the v i l l a g e . " The phrase "at r a n d o m ' '
is also used to characterize the selec-
t i o n of intensive e n q u i r y families
w i t h i n the sample villages. (Sum-
mary of The Survey Report, Bom-
bay, 1955. pp 4 and 1 ) .
Nor do we find any explanation
of the way the 75 districts were
chosen in the f u l l version of the
Survey Report w h i c h appeared in
1956. As against this reticence in
regard to the districts, we read in
Chapter 1 that the villages " w e r e
selected w i t h p r o b a b i l i t y propor-
tional to p o p u l a t i o n " , a n d that the
families for the Intensive Survey
were chosen " a t r a n d o m " after stra-
tification. (Survey Report' pp 12
a n d 5.)
By contrast, in the Technical Re-
port (published at the end of 1956)
we come again u p o n the c l a i m that
the selection of the districts was "at
r a n d o m " , this t i m e , however, i n t w o
versions w h i c h are not quite con-
sistent. F r o m the i n t r o d u c t o r y dis-
cussion of "Selection of Sample
U n i t s , " i t w o u l d appear that the
procedure had included stratification
w i t h regard to three factors:
" I n m a k i n g the selection i t was
considered desirable that the sam-
p l e should be representative of the
geographical and a g r i c u l t u r a l re-
gions of the country. T w o factors
representative of a g r i c u l t u r a l con-
d i t i o n s w h i c h were taken i n t o con-
sideration f o r this purpose are the
percentage area under cash crops
a n d the percentage area under i r r i -
gation. Subject to considerations
r e g a r d i n g these two factors a n d geo-
graphical representativeness, the
selection of the 75 districts was made
at r a n d o m f r o m among the 302 dis-
t r i c t s . " (Technical Report, pp 3-4.)
A c c o r d i n g to the A p p e n d i x on sam-
p l i n g errors, however, the method
w o u l d seem to have been unstrati-
f i e d simple r a n d o m s a m p l i n g :
"The first stage in the sampl-
i n g process was the selection of
districts at random and w i t h equal
p r o b a b i l i t y f r o m among the to-
tality of districts in, the country.''
(Technical Report, p 1037. Ita-
lics a d d e d — D T ) .
T h i s contradiction i s reflected i n
the description of the overall sampl-
THE
i n g scheme in the Technical Re'
port as "multi-stage w i t h stratific-
ation at some of the stages." ( T e c h n i -
cal Report, p 1037. Italics added
— D T ) . W e k n o w that w i t h i n each
sample' district the villages were
stratified into those w i t h w o r k i n g
credit societies and those without
We also k n o w that the families w i t h i n
each sample v i l l a g e were stratified
i n t o ten groups according to size
of cultivated holdings. The only
stage in respect of w h i c h it is not
quite clear whether there was stra-
t i f i c a t i o n or not is the first, t h e s e -
lection of the sample districts. The
phrase, "stratification at some of
the stages," evades the question
w i t h regard to the first stage.
W A S T H E SAMPLE RANDOM?
R e t u r n i n g to the p r o b l e m of whe-
ther the 75 districts were in fact
d r a w n at r a n d o m , we note that the
discussion of s a m p l i n g errors of
estimates in the Technical Report
refers o n l y to the d i s t r i c t estimates,
that is, the estimates based on the
data f r o m the 8 sample villages in
each district. No attempt is made
to discuss or calculate the s a m p l i n g
error of estimates at the A l l - I n d i a
level, that is, the estimates based
on the data f r o m the f u l l sample
of 75 districts. (Technical Report,
pp 1035-45.) T h i s omission w o u l d
be justifiable only if the districts
had not been selected at random.
T h e a m b i g u i t y of the RCS in res-
pect of the randomness of the first-
stage sample m a y p r o v i d e a clue to
the unusual h u m i l i t y displayed in
respect of the v a l i d i t y and represent-
ativeness of the data.
At the outset, the Committee of
D i r e c t i o n failed to define the p r i -
mary a i m of the survey. G i v e n the
available resources, they were not
in a position to o b t a i n estimates of
good r e l i a b i l i t y b o t h f o r I n d i a as
a whole a n d also i n d i v i d u a l l y for
75 districts. H a d the Committee
been clear f r o m the start that they
intended to aggregate their data at
the A l l - I n d i a level, they w o u l d per-
force have had to c o n f o r m s t r i c t l y
to the p r i n c i p l e s of r a n d o m selec-
tion of sample units. T h e y would
also have done better to scatter the
600 sample villages more widely
t h r o u g h o u t I n d i a , that is, in more
than 75 of the 302 districts.
I f , however, the Committee felt
that the sound course lay in focus-
sing their efforts on i n d i v i d u a l dis-
tricts, the p a r t i c u l a r districts to be
960
ECONOMIC WEEKLY
studied m i g h t w e l l have been select-
e d purposively i n the l i g h t o f the
Committee's p r i o r knowledge and
particular interests. In this case,
the 600 sample villages m i g h t more
f r u i t f u l l y have been concentrated in
a m u c h smaller number of districts
than 75, in order to ensure greater
accuracy of representation at the
district level.
The design w h i c h was adopted
appears to represent an unhappy
compromise between conflicting ob-
jectives. It was efficient neither for
o b t a i n i n g A l l - I n d i a estimates nor f o r
o b t a i n i n g district-wise estimates.
D I S T R I C T AS BASIC U N I T
T h e Survey R e p o r t states that the
administrative d i s t r i c t was taken as
the "basic u n i t ' ' of study for the
reason that: "this was the smallest
u n i t for w h i c h it was possible to
present a c o m p a r a t i v e l y f u l l p i c t u r e
of the credit system on its 'demand 1
side and also on the 'supply' side
at various levels," T h e study was
directed, we are t o l d , towards ob-
t a i n i n g "integrated d i s t r i c t samples
of the w o r k i n g of r u r a l credit ma-
c h i n e r y . " (Survey Report, pp 9 and
11).
To a i m at an integrated d i s t r i c t
picture of the demand a n d s u p p l y
of r u r a l credit is to seek the non-
existent. Credit operations in the
Indian countryside are, above a l l ,
local and unorganized. Loans are
advanced c h i e f l y by village money-
lenders or traders who f u n c t i o n as
l i t t l e monopolists. There may be
thousands of separate " c e l l u l a r " cre-
d i t markets of this type in a single
district. The heart of the r u r a l cre-
dit p r o b l e m in I n d i a has been pre-
cisely the discreteness of money-
lender-borrower relationships. It was
premature, to say the least, to speak
o f the " w o r k i n g o f r u r a l credit ma-
c h i n e r y " at the d i s t r i c t level. In
most o f r u r a l I n d i a machinery h a d
not yet developed f o r b r i n g i n g
s u p p l y and demand together at any
level higher than the village.
There was, however, one special
sense in w h i c h the administrative
districts served as units in respect of
r u r a l credit. In the officially spon-
sored co-operative movement each
district, no matter how large or h o w
varied, was considered the sphere of
j u r i s d i c t i o n of a D i s t r i c t Central
Co-operative Bank. A p r o g r a m m e of
w o r k i n g t h r o u g h one, a n d only one,
of these Central Banks in every dis-
t r i c t already had the support of
 THE ECONOMIC WEEKLY
the Reserve B a n k . T h i s p o l i c y was
strongly re-affirmed i n the recom-
mendations of the Committee of
D i r e c t i o n . It is possible that in, fo-
cussing the RCS on the districts the
Committee were influenced by their
interest in strengthening the net-
w o r k of D i s t r i c t Central Co-operative
Banks.
SECOND-STAGE SAMPLE
T h e second stage of the sampling
process was the selection of 8 v i l -
lages in each of the 75 districts.
T h i s meant that 75 different sampl-
i n g fractions were employed. Eight
out of 334 villages were taken in
S i r o h i d i s t r i c t of Rajasthan, and
eight out of 10,517 villages in M i d -
tmpur d i s t r i c t of West Bengal. In
S i r o h i , then, the second-stage sampl-
i n g f r a c t i o n was r o u g h l y 1 village
out of 40, whereas in M i d n a p u r it
was 1 out of 1,300.
In point of fact, two random
samples of f o u r villages each were
d r a w n in each district, each sample
being d r a w n separately. T h e first
sample of 4 villages in each district
was d r a w n f r o m a list of villages
reported to contain working pri-
mary cooperative credit societies.
T h e second sample of 4 villages in
each district was d r a w n f r o m a list
of the r e m a i n i n g villages in that
d i s t r i c t — t h a t is, villages without
w o r k i n g p r i m a r y cooperative credit
societies.
T h e reason for d r a w i n g this two-
f o l d sample, we read in the Tech-
nical Report, was that "one of the
m a i n objects of the Survey was to
study the w o r k i n g of cooperative
credit in r u r a l areas .. . . " ' We
may recall, however, that this " m a i n
object" was not set out in the terms
of reference given by the Reserve
Bank. As . o f 1951, the Reserve
Bank knew only too w e l l that the
cooperative movement in I n d i a was
weak and played a very m i n o r role
in r u r a l credit. M a n y bodies of en-
q u i r y had attested this fact in the
decade before 1 9 5 1 . Most recent of
these was the R u r a l B a n k i n g E n q u i -
ry Committee, the headquarters of
w h i c h had been in Bombay, at the
Reserve Bank. The Report of the
R u r a l B a n k i n g E n q u i r y Committee,
signed i n M a y , 1950, commented
as follows on the place of coopera-
tives in r u r a l credit : " A s yet they
cover a very s m a l l p r o p o r t i o n of
Technical Report, p 1. F o r the
terms of reference of the RCS, see
Survey Report, V o l 1, Part 2, p
704, and the General Report, p 3.
the r u r a l people and meet o n l y a
fraction of their credit requirements,
and, except in a few regions, their
w o r k i n g has not been very satisfac-
tory ."† ln this j u d g m e n t , the
Rural B a n k i n g E n q u i r y Committee
followed closely the views expressed
in the 1945 Report of the A g r i c u l -
t u r a l Finance Sub-Committee of the
Policy Committee on A g r i c u l t u r e ,
Forestry and Fisheries, appointed by
the Government of I n d i a .
By selecting h a l f of the sample
villages f r o m the relatively small
number of villages in w h i c h coope-
ratives were f u n c t i o n i n g , the Com-
mittee of D i r e c t i o n placed yet ano-
ther serious l i m i t a t i o n on the
representativeness of the RCS data.
Once again, the impression is creat-
ed that the Committee were con-
cerned more w i t h their prospective
policy recommendation for a vast
expansion of cooperatives than w i t h
the actual f u n c t i o n i n g of credit in
the r u r a l areas at the time of the
Survey.
The Findings
It w o u l d be gratuitous, in view of
the foregoing, to w a r n that the RCS
"findings"' have to be approached
w i t h circumspection. The fact that
the RCS data appear in books bear-
i n g the Reserve Bank's m o n o g r a m
does not raise them, ipso facto, to
the level of statistical currency of
the r e p u b l i c .
The RCS " f i n d i n g " w h i c h receiv-
ed the greatest attention in the
newspapers and p u b l i c discussion
pertains to the place of coopera-
tives in the total a g r i c u l t u r a l credit
s u p p l y " p i c t u r e " . Out of all credit
advanced to cultivators, the Survey
Report states, cooperatives supply
only 3.1 percent. By contrast,
moneylenders (both professionals
and agriculturists who also do some
l e n d i n g ) s u p p l y about 70 percent.
The rest is said to come f r o m "rela-
tives'", f r o m "traders", f r o m " l a n d -
lords" (to their tenants), f r o m Gov-
ernment and from commercial
b a n k s . ' ' " T h e utter insignificance
† Report of the Rural Banking
Enquiry Committee (Government
of I n d i a , M i n i s t r y of Finance,
Department of Economic Affairs,
New D e l h i , 1 9 5 3 ) , pp 46-47.
Survey Report. V o l I, Part 2
( C r e d i t Agencies), p 2. In this
chapter, details are given on (1)
total debt stated to be owed to
these various suppliers, and ( 2 )
total b o r r o w i n g s in the past year
f r o m the suppliers.
961
SPECIAL NUMBER JUNE 1960
of the volume of credit s u p p l i e d to
the c u l t i v a t o r by the cooperative
movement" the Committee of E r e c -
t i o n w r i t e , was perhaps "the most
startling revelation of the Survey
. , . . " ' . (The General Report. Recom-
mendations, p 8.)
SPURIOUS STATISTICAL PRECISION
Before retracing the steps by
which the figure of 3.1 percent was
produced, let us be clear in what
respect this " f i n d i n g " could be con-
sidered a surprise. Innumerable
reports, books, and speeches in the
years before the RCS had noted that
the part of the cooperative move-
ment in r u r a l credit had been very
small, very m i n o r , insignificant, etc.
The new element contributed by the
RCS consisted in the apparent sta-
tistical precision w i t h which the
share of the cooperatives as credit
suppliers was expressed.
We have previously noted that no
questions about amounts loaned out
were put either to professional
moneylenders, to traders, or to r u r a l
families w h i c h m i g h t have advanced
credit to their neighbours. Thus,
on the supply side, no quantitative
i n f o r m a t i o n whatsoever was collect-
ed f r o m the most i m p o r t a n t source'
of r u r a l credit.
Instead, the credit s u p p l y p i c t u r e
has been b u i l t up f r o m replies to
questions about borrowings on the
demand schedules. T h i s procedure
m i g h t be expected to yield precise
results i f , and only if :
( 1 ) borrowings were actually re-
ported by a l l the sample fa-
milies w h i c h had taken loans;
(2) the amounts borrowed were
correctly stated;
( 3 ) the agencies f r o m w h i c h the
loans had been taken were
p r o p e r l y i d e n t i f i e d ; and
( 4 ) the answers were accurately
w r i t t e n d o w n by the RCS
field workers.
Because of the sensitive nature of
debt as a subject and the relentless
pressure on the investigators for
speed, we know that these condi-
tions were not in fact fulfilled.
Since no system of cross-checking
was b u i l t into the design of the de-
mand schedules, a n d no objective
verification was attempted, no con-
fidence can be placed in numerical
values derived f r o m these data.
Even if the data on total borrow-
ings a n d the sources of these bor-
rowings were of unexceptionable
q u a l i t y , the fact remains that be-
cause of the peculiar nature of the
RCS sample, the 127.000 families
 SPECIAL NUMBER JUNE 1960
f r o m w h i c h this i n f o r m a t i o n was
gathered may not constitute a pro-
b a b i l i t y sample o f r u r a l families i n
I n d i a . If the 75 districts were not
selected at random, we have no way
of k n o w i n g how the facts about bor-
rowings by these p a r t i c u l a r 127,000
families w o u l d compare w i t h data
on the borrowings of the universe
o f I n d i a n r u r a l families, I n sum,
the range of uncertainties is such
thai the RCS does not p r o v i d e a
basis f o r saying whether the actual
c o n t r i b u t i o n of the cooperatives to
the supply of r u r a l credit was 1
percent, 3 percent, 6 percent, or
even 9 percent.
It is therefore remarkable that
the Committee of D i r e c t i o n permit-
ted themselves to c a r r y the calcula-
t i o n beyond the decimal p o i n t . Of
all fresh b o r r o w i n g s by c u l t i v a t i n g
families, d u r i n g the year 1951-52,
we are i n f o r m e d , 3.1 percent were
from cooperatives. W i t h regard to
their total outstanding debt (as
distinguished f r o m loans taken dur-
i n g the Survey year) we learn that
exactly 3.7 percent of the total was
owed to "cooperatives and commer-
c i a l banks together". Statement of
the p r o p o r t i o n s owed by c u l t i v a t i n g
families to different agencies in
tenths of percents w o u l d appear un-
w a r r a n t e d on the basis of materials
in w h i c h , we are t o l d , "Separate
data on debt owed to cooperatives
a n d c o m m e r c i a l banks are not avail-
able." ( S u r r e y Report, V o l u m e 1.
Part 2, pp 2-3)
We may also note that, according
to the RCS. after the professional
moneylenders to w h o m 46.8 percent
was owed, and a g r i c u l t u r i s t money-
lenders to w h o m 25.2 percent was
owed, the t h i r d most i m p o r t a n t
g r o u p , to w h o m 11.4 percent of all
outstanding debts was due, was
"relatives". (Surrey Report, V o l u m e
I , Part 2 , p p 2-3) Nowhere i n the
RCS materials do we find a defini-
tion of this category. T h e extent to
w h i c h "relatives" overlapped w i t h
moneylenders. traders or money-
l e n d i n g agriculturists is u n k n o w n .
Kven apart from "relatives", con-
fusion in the identification of lend-
ers was inevitable, in view of the
prevalence in many areas of per-
sons whose activities encompassed
both t r a d i n g and money lending.
Since the RCS supply categories
were not m u t u a l l y exclusive, the
significance of the figures given for
the' share of total debt to any one
becomes dubious,
CAPITAL FOBMATION ESTIMATE
T h e Committee o f D i r e c t i o n have
also p u t f o r w a r d an A l l - I n d i a esti-
mate of gross capital f o r m a t i o n by
r u r a l families i n 1951-52. I n view
of the "great general interest" in
capital f o r m a t i o n , the Committee
w r i t e ' they have made an exception
to their '"general r u l e " against pre-
senting overall total estimates for
the whole c o u n t r y . For purposes of
this estimate the Committee u t i l i z e
A l l - I n d i a averages (i e, averages
of the data f r o m a l l 75 districts) of
the amounts p a i d out per f a m i l y
d u r i n g the year on account of b u i l d -
i n g construction, on account of "ca-
p i t a l expenditure i n non-farm busi-
ness'' a n d on account of " c a p i t a l
expenditure i n a g r i c u l t u r e exclud-
i n g land and livestock purchase".
Expenditures f a l l i n g in these three
categories are added up separately
for c u l t i v a t i n g families and non-
c u l t i v a t i n g families, then m u l t i p l i e d
respectively by the estimated num-
bers of one and the other type of
family in rural India. The total
amount a r r i v e d at in this fashion
is Rs 650 crores. In the Survey
Report the Committee make much
of this figure w h i c h , they term
" v e r y h i g h " , and take as i n d i c a t i n g
that capital f o r m a t i o n was m u c h
higher than usually estimated.
(Survey Report, Rural Families, pp
710, 720, and 7 2 8 )
Mo scientific standing attaches, to
this estimate of Rs 650 crores. It is
put together in large part from
data recorded in response to un-
answerable questions. We have
mentioned above the difficulties in-
herent in the item on "non-farm
business". There were also, we
have noted, w i d e variations in the
way the investigators understood
the instructions on what to record
under the head of "other capital
expenditure i n a g r i c u l t u r e " .
M o r e i m p o r t a n t , in a country like
India no set of data l i m i t e d to ex-
penditures can suffice to b u i l d up a
sound estimate of capital f o r m a t i o n .
Because of its p a r t i a l and discrete
character, the RCS material on r u r a l
families cannot be aggregated to
furnish overall measures of this
type. Despite the considerable
g r o w t h of interest in capital f o r m -
ation, the RCS figure has been v i r -
tually ignored in serious discussion
of the subject. Even subsequent
Reserve Bank publications w h i c h
refer to capital f o r m a t i o n have left
this RCS " f i n d i n g " out of consider-
ation.
962
THE ECONOMIC WEEKLY
NATURE OF TABULATIONS
Aside f r o m the h a n d f u l of un-
reliable A l l - I n d i a estimates, the RCS
" f i n d i n g s " are b r o u g h t together i n
the frequency d i s t r i b u t i o n s to w h i c h
we have referred. F r o m these we
can discover such facts as that in
114 of the 600 sample villages the
average expenditure of c u l t i v a t i n g
families on purchase of livestock
fell between Rs 100 and Rs 200.
Since we have been warned not to
infer f r o m this circumstance that
the average annual expenditure of
cultivators for livestock w o u l d be
from Rs 100 to Rs 200 in about one
out of every six villages in I n d i a ,
the i n f o r m a t i o n is of decidedly
l i m i t e d interest.
W i t h i n the villages, the districts,
the States and the Regions, many
items of i n f o r m a t i o n are given se-
parately for various classes of c u l t i -
vators. T h e average amount bor-
rowed per f a m i l y , for example, is
reported not only for a l l families
and for all c u l t i v a t i n g families but
also for the " b i g c u l t i v a t o r s " , the
' l a r g e c u l t i v a t o r s " , the " m i d d l e c u l -
tivators" and the "small c u l t i v a t o r s " .
These four labels s i g n i f y respective-
ly (he first decile, the first three de-
ciles, the four centre deciles and the
lowest three deciles of the whole
list of c u l t i v a t i n g families ranked
by size of cultivated h o l d i n g .
As we know, "the d i v i s i o n into . . .
strata | deciles | was made separate-
ly for each village'', (Survey Re-
port, p 823. Italics a d d e d — D . T . )
Since there were 600 villages, this
means that there were 600 sets of
strata. In g i v i n g averages for each
of the f o u r clases of c u l t i v a t o r s —
the big. the large, the m i d d l e and
the small the RCS is presenting
figures for 000 disparate groupings.
DISPARATE GROUPINGS
Because the RCS has defined its
"classes" in terms of fixed percent-
ages, of families in each village, the
terms have a different meaning in
respect of each village. As soon as
data for b i g cultivators f r o m one
village are taken together w i t h those
for b i g cultivators i n another v i l -
lage, a heterogenous mass of f a m i -
lies is gathered up into a single
class. Conditions vary so w i d e l y
that even in a d j o i n i n g 'districts the
smallest cultivated holdings in one
village may. in absolute physical
terms, equal or even exceed the
largest cultivated holdings in ano-
ther village. To collate data refer-
r i n g , for example, to the upper three
deciles in a village of d w a r f holders
THE ECONOMIC WEEKLY SPECIAL NUMBER JUNE 1960

w i t h data collected f r o m the upper course, the w a y credit was actually has to grapple w i t h profound diffi-
three deciles; in a village where f u n c t i o n i n g in r u r a l I n d i a at the culties. What is unfortunate is.
large holdings predominate, is to time of the Survey. The design of that the Committee of D i r e c t i o n clut-
cumulate information about two the e n q u i r y followed the lines of a ched at quick and shoddy solutions.
altogether dissimilar groups of c u l - vision of the future rather than From the scientific point of view the
tivators. Yet this is exactly what those of the existing structure of greatest need was. and still is, for
has been done in numerous district, credit in the countryside. conceptual c l a r i t y : f o r an unified
State and regional tables. Insofar as the a i m was to provide framework of categories and rela-
A similar disparity characterizes a sound factual basis for the formu- tionships in terms of w h i c h data may
the g r o u p i n g of intensive e n q u i r y lation of long-term r u r a l credit be collected, evaluated and inter-
families into classes according to policy, the RCS was a failure. The preted. On this score the Commit-
value of gross produce. The Sur- Committee of D i r e c t i o n sacrificed tee, in extenuation of their use of
rey Report concedes that data so completeness of f a m i l y coverage in inadequate indicators, plead the
presented do not lend themselves to order to c a r r y through a nationwide "want . . . o f any other easily avail-
use for analytic purposes ; survey in a single year. Rut they able and q u i c k l y applicable c r i t e r i a
" l t is obvious that the compo- d i d not succeed in p r o d u c i n g either of classification . . " (.Survey Re-
sition of classes of c u l t i v a t o r s by valid or reliable estimates for I n d i a port, p 824 see also p 65.) Haste
value of gross produce is extreme- as a whole. I m p r o p e r use of the and convenience, in effect, became
ly m i x e d ; each class contains survey method ensured u n r e l i a b i l i t y , the watchwords of the RCS. No
various types of fanners h o l d i n g while weakness of design led to wonder, that, viewed as a scientific
relatively very different positions poor representativeness. enquiry, the Rural Credit Survey
in their respective f a r m i n g econo- There can be no question that an must be deemed deficient in every
mies. A farmer from among the investigation of r u r a l credit in I n d i a major respect.
top strata in a low monetized eco-
nomy and a lower strata farmer
f r o m a h i g h l y monetized economy
may both fall in the same class of
value of gross produce. In the
various classes grouped according
to average value of gross
produce, different proportions f r o m
different regions and thus w i t h
different degrees of commerciali-
zation or intensity of f a r m i n g ,
etc. w o u l d have been i n c l u d e d .
"lt w o u l d not be possible, in
the circumstances, to make any
observations on expenses, receipts,
debt or repayments, or any rela-
tions between these factors, based
on these data". (Survey Report,
p 826)
Assessment
At every stage of the RCS we find
a disproportionate emphasis on those
elements in the r u r a l scene w h i c h
fitted in w i t h the C o m m i t t e e s pre-
conceptions as to the way in w h i c h
the credit system should be recon-
structed. Hence the focus on " f a r m
business"; the preoccupation w i t h
cultivated holdings at the expense of
ownership h o l d i n g s ; the adoption of
the administrative district as the
basic unit of the Survey; and the
undue w e i g h t i n g given, in the choice
of sample villages, to villages in
w h i c h cooperative societies were
f u n c t i o n i n g . T h e programme w h i c h
the Committee of D i r e c t i o n subse-
quently recommended to the Reserve
Bank envisaged a vast hierarchy of
State and district banks dispensing
credit through village cooperatives
in accordance w i t h the production
needs of business-like, market-
oriented farmers. T h i s was not. of
963
SPECIAL NUMBER JUNE 1960
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964