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THE ECONOMIC WEEKLY SPECIAL NUMBER JUNE 1960
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 India: 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 Bank of Ind ia an-nounced in August 1951 i ts
de-
cision to sponsor a country-wide Sur-vey in order to ob ta in a
factua l ba-sis f o r the fo rmat ion of long-term pol icy in the
sphere of rura l credi t . Not surpr is ing ly , problems of agr i
-cul tural f inance and v i l lage debt had provided the topics for
a long series of earl ier governmental enquir ies. One impor tant
feature dist inguished the proposed Rura l Credit Survey f r om its
predecessors. These had re-l ied p r i m a r i l y on the t
ime-honoured method o f i nv i t i ng "ev idence" f r o m persons
deemed to he par t icu lar ly knowledgeable. The, Reserve Bank, by
contrast, called for the direct col lect ion of fresh f ield
data.
To design and conduct this Sur-vey, to in terpret its results
and to
make recommendations, the Bank appointed an expert Committee of
D i rect ion. A l though small — its membership consisted of three
h igh-rank ing Reserve Bank officers and two non-officials — the
Committee included men of wide experience, in v i l lage surveys,
agr icu l tu ra l credit operations, and general administra-t ion .
The Reserve Bank instructed the Committee to car ry out a Survey
which would "adequately cover dif-ferent strata of the agr icu l
tura l po-pulat ion in representative parts of the country w i th
reference to their credit needs and to the agencies, ex-ist ing or
needed,, f o r f u l f i l l i ng those requirements." The
Committee were also asked to look in to other aspects of r u ra l l
i f e , "such as the pat tern
of savings and deficits in the agr i -cu l tu ra l economy, the
trends, i f any, toward shifts in income, and the problem o f capi
ta l f o rmat ion in ru -ra l areas." (Survey Report, Vo l I, Part
2, p 704.)
Ac t ing p rompt ly , the Committee of Di rect ion organized an
elaborate programme of f ie ld investigations which were carr ied
out over the year 1951-52 in 600 vi l lages located in 75 of
India's 302 administrat ive dis-tr icts. In A p r i l 1952. when
well more than half of their f ield survey was over, the Committee
reported opt imist ica l ly to the Reserve Bank that the qua l i t
y of the data collected was on the whole, satisfactory. They ant ic
ipated that their report would be completed in October of the
same
The A l l - I nd ia R u r a l Credi t Survey, as f inal ly
issued in Bombay by the Reserve Bank over the signatures of
the Committee of D i rect ion, consists of three volumes.
Volume I is cal led the Survey Report and is in two parte:
Part I (Rural Families) and Part 2 (Credit Agencies), dated
respectively 1956 and 1957.
Volume II is called the General Report and contains the
Committee's recommendations; it is dated
Bombay, 1954.
Volume HI i« called the Technical Report and is dated Bombay,
1956. Pract ical ly all of this th i rd volume consists of tables
of data (900-odd pages), blank schedules, and summaries of the
instruct ions o r i g i -nally issued to the staff f o r fil l ing
up the schedules. Hence the volume might better have been called
Data or "Tables" Proper ly speaking, we are stil l without a
technical report on the Rural Credit Survey.
A h igh ly condensed version of Vo lume I, The Survey Report,
was issued by the Reserve Bank in 1955. It is ent i t led. All
India Rural Credit Survey. Vo lume I, The Survey Report:
Summary.
There are two official condensations of Vo lume II, The General
Report. One is a brochure in 64 pp entit led Vo lume H, The General
Report: Summary; the other is a crown octavo book of 300 pp ent i t
led, The General Report: Abridged Version. Both of these were publ
ished by the Reserve Bank in 1955.
949
The Al l - India Rural Credit Survey
V i e w e d as a S c i e n t i f i c E n q u i r y Daniel
Thorner
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SPECIAL NUMBER JUNE 1960 T H E E C O N O M I C W E E K L Y
year. Th i s was, of course, much too sanguine. In the middle of
De-cember, 1952, the Committee of Di rec t ion had to advise the
Reserve Bank that the work had tu rned out to be much more than ant
ic ipated. 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 '
t ime. Progress was reported in, the prepara t ion of regional and
A l l Ind ia tables.
By August, 1954, three years after the Survey was launched, the
Com-mittee was ready w i t h its recom-mendations. The 580-page
General Report embodying these p o l i c y pro-posals referred only
casually to the results of the field work . A b r i e f 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 publ ica t ion — in the Survey
Report and the Technical Report, to-gether conta ining 1000 pages
of tables and 1800 of text — of the author i ta t ive version of
the Survey data and the Committee's analysis thereof.
By the t ime 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 Ind i a and the Re-serve Bank had
already accepted and taken major steps to implement the 1954
recommendations of the Committee of D i r ec t ion . Since only a h
i g h l y condensed discussion of the findings had been pr in ted ,
neither the actual figures nor the methods by w h i c h they had
been obtained cou ld be evaluated object ively. None-theless, the
great quant i ty of mate-rials known To have beeen amassed and
presumed to have been taken into account lent unusual weight to the
Committee's conclusions. Fur-ther, the Rura l Credit Survey (RCS)
enjoyed the prestige of hav ing been conducted under the auspices
of India ' s premier f inancia l i n s t i tu t ion . W i t h this
impressive backing, the Committee's proposals- neatly carr ied the
day. Before the heavy tome? of the Report could be pr in ted , let
alone read, studied, or discussed, the programme of action was
under way. Bi l l s were speedily introduced and passed, the
highest bank in Ind ia was nationalized, a govern-mental
warehousing corpora t ion 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.
Al though the data collected by the Rura l Credi t Survey (RCS)
cou ld not readi ly be d r a w n upon 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.
Internat ion-al agencies have evinced interest in using the RCS as
a model fo r i n -vestigations of agr icu l tu ra l credit problems
in other countries. A pro-posal to repeat the survey on a grand
scale in I n d i a is current ly re-ceiving consideration. Accord
ingly , it w i l l not be out of place to attempt an assessment of
the RCS as a scien-t if ic enqu i ry leaving aside the ques-t i on
of its influence on po l i cy .
Dimensions of the Enquiry The decision to undertake such
an enquiry , i t w i l l be recalled, was made in August, 1951.
By the end of October, 1951, the investigators had started on their
way to the 600 villages selected for survey. These f ie ld workers
carr ied w i t h them seven schedules and five question-naires. The
most impor tan t of these schedules was ent i t led, '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 al l
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 inc luded: specified types of capital expenditure
in agr icu l tura l and non-farm business, f ami ly 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 wh ich were to be filled up at least once
each for 15 sample families in each of the 600 villages, that is.
fo r a much smaller sample of 9000 famil ies . As against the data
on 127,000 famil ies 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 detai l the same ground as the
general schedule; in part , how-
950
ever, they asked a wide var ie ty of new questions.
I t is w o r t h pausing a moment to consider the impl ica t
ions 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 enqu i ry was decided u p o n ; a multi-stage sampl ing
design prepared; 600-odd questions f ram-ed, translated in to a ha
l f a dozen languages and p r i n t e d ; and a staff of
investigators and inspectors re-crui ted, t ra ined, and sent in to
the f ie ld . No p i l o t enqu i ry was con-ducted to see how the
new schedules w o u l d w o r k out. No t r i a l tabulations were
made to see whether the sche-dules would y ie ld the requisite data
in suitable f o r m .
W O R K - L O A D O F F I E L D S T A F F
The schedules and questionnaires to w h i c h we have referred
above constitute on ly the "demand" forms. In addi t ion , 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 f inal is ing of the "demand" forms and
sent out to the 225 investigators and inspectors. A l l the " s u p
p l y " and "demand" forms were to be completed by the middle o f
1952.
The field staff were also instruct-ed to collect comprehensive
back-g round data on the districts in which they were w o r k i n g
. Topics on which d i s t r i c t i n f o r m a t i o n was to be
gather-ed inc luded: r a i n f a l l , climate, water supply and i
r r i g a t i o n ; crop pat tern, pa r t i cu la r ly for
commercial and garden crops; processing plants, i n -dustry in
general and m i g r a t i o n ; t ransport arrangements, costs and
ne twork ; market ing centres and value of total transactions. A
de-tailed l i s t ing of a l l types of banks was to be made and a
dis t r ic t 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 supp ly of r u r a l credit by al l
agencies and an-alyse their in ter re la t ions ; character-ize the
l i q u i d i t y of credit , the work-ing of co-operatives, the f
inancing of market ing , the relations of land-lords, tenants, and
cropsharers, the w o r k i n g of the debt re l ief laws, and the
extent of evasion of legislation for the control of
moneylenders.
Supervis ion, l ike t r a in ing , appears to have been sk impy.
To ensure u n i -f o r m understanding and implement-
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T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960
at ion of instructions there has to be frequent contact between
the higher officers and the men in the f ie ld . In the RCS, the
arrangements fo r the guidance and control of the field staff were
less than adequate.
MERCILESS SCHEDULE
A rigorous t ime schedule was set by the Committee of Di rec t
ion in Bombay for the completion of the various phases of the field
work . Inspectors were required to send in fo r t n igh t l y
progress reports to prove that they were keeping up to schedule. In
Ind ia i t is an old story that if "progress" has to be report-ed,
it will be reported. After a l l , what is progress but inkmarks on
paper? W i t h heavy workloads, a merciless t ime schedule, and
unre-lenting pressure for adherence to i t , what could the men in
the field do but f ran t ica l ly fill up forms and send them in
without pay ing attention to the qua l i ty or consistency of the
data ?
The course followed in 1951-52 by the Committee of Direct ion
might perhaps have been par t ia l ly understandable if their
Survey were the fifth or s ixth of a series of such surveys which
had already explored and re-explored all the major fa-cets of the
ru ra l credit scene. But the 1951 Survey was the first of its k i
n d in Ind ia . The least that the Committee of Di rec t ion could
have done was to define their task as a whole ; and to indicate the
phases in which they would cope w i t h i t . There is noth ing in
the instructions f rom the Reserve Bank to indicate that all the
field work had to be completed in twelve months or less.
F rom the point of view of the Reserve Bank's announced needs
for data to formulaic long-term rura l credit pol icy , 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 for th .
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 fi l led up w i
t h great care — would have been ade-quate to provide an
understanding of the conditions and w o r k i n g of agr icu l tura
l credit in Ind ia . On the " supp ly" side the Committee's
tar-gets for the collection of quanti tat ive data were ex t raord
inar i ly modest. Moneylenders, traders, and agr icul -
turists w i t h l i q u i d resources were well known to be the
chief suppliers of credit in the countryside. So far as concerns
the last g roup , the peas-ants who lent money, the Committee, in d
rawing up their schedu le for r u r a l families refrained from
ask-ing them how much they had lent or were lending. In expla ining
this, the Committee declared that they could not hope to get
reliable re-plies. They expected that these agriculturists wou ld
refuse to dis-close what they lent. When we turn 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. Nor were these
questions put in the questionnaire fo r traders in agr icu l tura l
commodities. Even at the outset the Committee seem to have
abandoned hope that they could obtain quanti tat ive data on the "
s u p p l y " side f r o m the persons in the best posi t ion to
know, i.e., the p r i n c i p a l suppliers, themselves.
On the "demand" 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 f
rom 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
stil l owed. For the analysis of these data on borrowings the
schedules included certain addi t ional questions on fa-mi ly
assets, income and expenditures.
OCCASIONS FOR B O R R O W I N G
However, nothing l ike a complete survey of the family economic
posi-t ion was attempted in the general schedule or in the more
detailed in -tensive schedules. The Committee of Direc t ion have
explained that because of the large scale of the enquiry , the RCS
was not designed to record enough data on any single fami ly so
that a proper balance could be struck on either capital account or
current account. Instead of an overal l approach the RCS
concent-rated on "activit ies directly affecting the debt
position........".'Questions
Survey Report, Vo l I , Par t 1 , (Rural Families), p 228.
Hence-for th , unless otherwise indicated, all citations of the
Survey Re-port w i l l refer to this first par t , Rural
Families.
951
were designed in order to b r i n g out transactions presumed
"special ly" to lead to borrowings or repayments.
The need to borrow was envisag-ed as spr inging from three
sour-ces: f r o m cul t ivat ion, f rom economic activities other
than cul t ivat ion, and f r o m the maintenance of the house-hold
. Expenditures on these ac-counts were to be recorded in the RCS
demand schedules under the respective rubr ics : " f a r m
business," "non-farm business," and " f a m i l y l i v i n g . ' '
This three-fold divis ion pro-vided a framework w i t h i n which
the attempt was made to ident i fy unusual or large outlays which
may have been financed by loans. " I t was ex-pected," the
Committee have wr i t ten , "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 fami ly expenditure such
as death' marriage and other ceremonies, sick-ness and l i t i ga t
i on . " (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 wi th 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.
C U L T I V A T O R S AS ENTERPRENEURS
The one subject on which the RCS schedules t r ied to get a f a
i r ly fu l l report was what the Committee called " f a r m
business" W i t h i n the purview of " f a rm business" the RCS
included all the agr icu l tura l acti-vities of every one of the
sample families which was found to be cul-t ivat ing land. Each cul
t ivat ing fa-mi ly was considered to be engaged in the business of
f a rming , to be operating an agr icul tura l enterprise. We read
that the RCS was concern-ed wi th "pr ivate household enter-prises
engaged chiefly in the busi-ness of agr icu l tu re" or w i t h
"the private enterprise sector in rura l I nd i a . " The amount of
land cult i-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 698) .
The type of questions which . the RCS asked about cul t ivat ion
fol low-
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SPECIAL NUMBER JUNE 1960 T H E E C O N O M I C W E E K L Y
ed the lines of the f a r m business survey techniques as used
in Eng-l and and Amer ica . Thus the I n -tensive E n q u i r y
schedules were planned to specify and record cash expenses of c rop
p roduc t ion and cash receipts f r o m disposal of agr i -cu l
tura l produce d u r i n g the year under study. The Committee of
Di rec t ion seem to have taken i t fo r granted that the most
impor tan t credit needs of r u r a l famil ies were those
connected w i t h the i r " f a r m business'' operations, and that
f a r m business cou ld be isolated f r o m other aspects of f a m
i l y l i f e for pur-poses of study. As a coro l la ry they
assumed that a survey centered on " f a r m business" transactions
d u r i n g a single year wou ld y i e l d the data requ i red fo r
comprehending the u n d e r l y i n g problems o f credi t i n the
Ind i an 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 Commit tee of D i rec t ion on the cre-d i t requirements of
cu l t iva t ion con-ceived as a business enterprise.
W i t h o u t exception, everyone in possession of a b i t of l
and w h i c h he cul t ivated qua l i f i ed fo r treat-ment by the
RCS as a cul t ivator , a man w i t h a cul t ivated h o l d i n g
. Everyone of these cul t ivators was taken to be a f a r m
business operator, no matter whether he also engaged in any other
economic ac t iv i ty , no matter how much of his w o r k i n g t
ime was actual ly devoted to c u l t i -va t ion , and no matter
how much of his income or l ive l ihood was deriv-ed f r o m i t .
Thus i f a m a n worked in agr icul ture one percent of his t ime
or 100 percent, he was record-ed as the operator of a cul t ivated
h o l d i n g ; i f crop p roduc t ion gave a f a m i l y of
merchants an insignif ic-ant pa r t of f a m i l y income, that f a
m i l y was nonetheless recorded as a cu l t i va t i ng f a m i l
y . The Com-mittee of Di rec t ion note the fact that the "cu l t
iva t ing fami l ies" constituted an extremely mixed bag. At the
top were well-off f o l k , engaged in a num-ber of act ivi t ies;
along w i t h cu l t i -va t ing some land they m i g h t have been
act ing as merchants, money-lenders, mil lowners . At the other end
there were masses of cult ivators who cou ld not depend on their
cul-t ivated ho ld ings ; they had to earn their l i v i n g in par
t , " f o r the large m a j o r i t y an impor tan t pa r t , " f r
o m other activit ies, p r i n c i p a l l y work-i n g fo r wages
fo r others. Regard-
i n g the mi l l i ons and mi l l ions of small cul t ivators w
i t h t i n y cult ivat-ed holdings, the RCS tells us that these
"are largely par t - t ime cul t i -vators.... whose economy approx
i -mates ' m o r e to that of non-cult iva-tors... " (Survey
Report, pp 887 and 949.)
" F A R M B U S I N E S S " — P O O R G U I D E T O
C R E D I T N E E D S
In the case of the smaller hold-ers, the RCS discovered that, on
the average, the receipts f r o m sale of produce d i d not even,
cover the cash expenses of the so-called " f a r m business." Large
propor t ions of those classified as "cul t iva tors ," the Survey
Report states, " fo l low this occupat ion chief ly f o r the
retained receipts i n k i n d f r o m f a r m busi-ness...." P 8 2
6 ) . Th i s is another way of saying that these fami l ies produce
p r i m a r i l y for their own consumption. Persons or famil ies
eating up their own output are not engaged in, ag r i cu l tu re as
a "busi-ness/' Rather than being "business-men" or " ag r i cu l t
u r a l entrepren-eurs," they are s i m p l y g r o w i n g food so
that they can have their da i ly meals. Insofar as these people are
concerned, the RCS has had to ad-m i t that details o f " f a r m
business" constitute no guide or at best a poor guide to their
needs f o r credit .
The approach of the Committee of D i rec t ion to the peasantry
re-sembled that of a banker toward his business clients. ( C f Dr H
a r o l d H M a n n on the Rura l Credi t Survey in the I n d i a n
Economic Review, V o l I I I , No 4 ( D e l h i , August 1957) , p
80.) The Committee wanted to con-centrate on the creditworthiness
of the peasants' ag r i cu l tu ra l operations and t r i ed to pu
t on the side the i n -numerable details o f f a m i l y l i v i n
g and of non-farm business. In the event they found that " the
business of the large b u l k of the small pro-ducers in I n d i a
, especially cultiva-tors, cannot be easily separated f r o m their
expenditure o n f a m i l y consumption account." Borrowings fo r
short-term and long-term "fa-m i l y expendi ture ," the Committee
discovered, many times overshadow-ed b o r r o w i n g fo r
investment or current p roduc t ion purposes. To ar r ive at an
understanding of the operations of the credit system, ac-co rd ing
to the Survey Report, it wou ld have been necessary " to take
account of the to ta l operations of the cul t ivator in r e l a t
ion bo th to
f a r m business and f a m i l y l i v i n g , . . . " (Survey
Report , p 402) .
S i m i l a r l y , the chapter on " I n -vestment and
Disinvestment" states that the business and the domestic economy of
the cul t ivators are "so mixed that i t would be impossible to
obta in any clear idea of deficits or surpluses unless f u l l
details of f a m i l y l i v i n g were collected at the same t ime
as details of f a r m busi-ness". In par t icular , the Com-mittee
conceded that they d i d not "go far enough, or almost not at a l l
in to stocks on hand, consumption d u r i n g the year in the f a m
i l y or stocks retained for consumption at the end of the year".
(Survey Re-port, p 7 6 5 ) .
Since very many of the "cu l t iva -tors" do not depend on cu l
t iva t ion alone, the Survey Report tells us, the approach to
credi t needs p r i -mar i l y th rough f a r m business is
inadequate :
" Income obtained f r o m f a r m i n g forms a m i n o r pa r t
of the to ta l annual income of a substantial percentage of cul t
ivators , and other sources of income have to be resorted to fo r
meeting the m i n i m u m consumption needs of the f a m i l y by
the majority of cultivators. ( I t a l i cs added). F r o m the po
in t of view of the R u r a l Cre-d i t Survey, the measurement of
de-f ic i ts of f a r m business by itself wou ld not be,
therefore, sufficient. Thus whi le i t may be impor t an t to
observe at what size of h o l d i n g or product ion level deficits
in agr icul-tu ra l business as such occurred, it is more important
to know the sur-pluses and deficits resulting from the total
economic activity of the f a m i l y " . ( I ta l ics added) .
(Survey Report, p 765)
Th is is tantamount to saying that the attempt to isolate f a r
m business f r o m total f ami ly economic ac t iv i ty proved
unreward ing .
B O R R O W I N G AS A B A L A N C I N G F A C T O R
I t was fur ther realized that neither debt nor b o r r o w i n
g nor consumption were necessarily related to the eco-nomic posit
ion of a f a m i l y in a par t icu la r year. The Survey Report
advises us that the operat ion of the credit system can best be
understood in re la t ion to levels of average ex-pectation of
income as a whole. The standard of l i v i n g — or, as the Survey
Report puts i t , " the total out lay on consumption goods and
services d u r i n g a year" — turned out to be a funct ion , "no t
o n l y of
952
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THE ECONOMIC WEEKLY SPECIAL NUMBER JUNE 1960
the income of the par t icu la r year but is also s ignif icant
ly related to the levels of income d u r i n g past years", (p
525.) Peasant famil ies — al l famil ies , in fact — get
accus-tomed to a cer tain level of l i v i n g . They go on t r y i
n g to l ive at that level, whether or not in any given year thei r
total resources are suffi-cient. When they f a l l short, they bor
row.
For peasant famil ies , the Survey suggests, b o r r o w i n g
may p lay the role of an overal l balancing factor :
" I t is the total requirements whe-ther on p roduc t ion or
consumption account, whether in k i n d or in cash, of the business
and f a m i l y needs of the cul t ivator or non-cult ivator that
have to be matched w i t h the total receipts in cash o r in k i n
d , f r o m whatever sources, obtained by the f a m i l y . In this
p ic ture of the inte-grated economy of the business and
consumption un i t , b o r r o w i n g may 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 bo r rowing may be " i r r e -levant" or wi
thou t special s ignif i -cance. Since, however, the schedules were
designed to emphasize par t i -cular occasions for b o r r o w i n
g , they d i d not y ie ld the i n f o r m a t i o n needed to
understand the func t ion 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 rom the data collected by us
d u r i n g the Survey to measure d i r ec t ly the ex-tent to wh
ich , or po in t precisely to the districts in which , b o r r o w
i n g d u r i n g the year may 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 thei r Report that an "occasional" approach
to borrow-i n g would be inadequate : " I t is obvious that the
purposes or occa-sions of b o r r o w i n g wh ich are capable of
being ascertained in a fact f inding invest igat ion po in t merely
to the pa r t i cu l a r c i rcum-stances in w h i c h par t i cu
la r debts were contracted. They give i n d i -cations of the o r d
i n a r y needs or the ex t raord ina ry circumstances on account
of wh ich the cul t iva tor
In order to assess the role of bor-r o w i n g as a ba lanc ing
factor, the Committee of Di rec t ion wou ld have had to take an
approach exactly op-posite to the one they chose. They would have
had to look for total economic ac t iv i ty and total economic
posit ion of the famil ies studied rather than for pa r t i cu l a
r instances in wh ich f a r m business operations might give rise
to credi t needs. " C U L T I V A T E D H O L D I N G " A S U N I T
O F
F A R M B U S I N E S S
The focus on fa rm business led the Committee to take as the
basic uni t 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 cul t ivated. As the local counterpart of the " f a r m " ,
the uni t of agr icu l tu ra l enterprise on wh ich the foreign " f
a r m business" surveys centre, the RCS took the "cu l t iva ted h
o l d i n g " . Th i s was defined to i n -clude the land operated
by a f ami ly , whether owned or rented i n , but to exclude any
other f a m i l y l and which the fami ly d i d not themselves
cul-tivate.
A n y plot of land larger than a mere garden patch (no specific
c r i -ter ion appears to have been set) qual if ied as a "cu l t
iva ted h o l d i n g " . These "cul t ivated hold ings" were
crudely ranked by size in physical acres regardless of qua l i ty
of soil or adequacy of water supply. Since the r a n k i n g left
out of account l and owned but not cul t ivated, a f a m i l y of
large holders who worked on ly a small par t of the i r l and 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 which the cu l t iva t ing famil ies were d iv ided into
ten equal groups ("deciles" or "s t rata") in terms of w h i c h
the data were compi led and analysed.
had to seek financial help. By themselves they do not constitute
the causes of either the par t icu lar debt or the general fact of
indeb-t edness . An enqu i ry in to the causes of indebtedness wou
ld have to t ravel much beyond the investi-gat ion of each occasion
of borrow-i n g . It wou ld necessitate a thorough study of a l l
aspects of the agr icul tur 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.
I t was apparently believed that differences in scale of f a r m
business operations, in credi t needs, in total debt etc wou ld by
and large reflect differences in size of the "cul t ivated ho ld
ings" .
S I G N I F I C A N C E O F O W N E R S H I P H O L D I N G
When they came to interpret the data, however, the Committee of
Di rec t ion were forced to the chasten-i n g conclusion that the
"cul t ivated h o l d i n g " was of severely l i m i t e d use for
the understanding of bor-rowing . In the words of the Survey Report
:
". . . the cul t ivated ho ld ing is sig-nificant chiefly for
short-term product ion credit . In relation to medium-term and
especially long-te rm product ion credit , on ly in a l imi ted
number of cases wou ld bo r rowing operations depend on the size of
the cul t ivated ho ld ing . They migh t depend much more closely
on the size of the owner-ship h o l d i n g / ' '
"Ownership h o l d i n g " , as d is t in-guished f rom
cultivated hold ing , refers to land he ld by f ami ly in f u l l
ownership r ights . People are much more l i ke ly , the Survey
Report slates, to make las t ing investments in agr icu l tu ra l
land wh ich they own, rather than in land wh ich they rent f rom
others. ( P . 6 5 7 ) .
The Survey Report contains a dis-cussion of debts in relat ion
to cu l t i -vated holdings . But for many purposes, the Committee
go on to state, "the more impor tan t relation wou ld 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 land con-stitutes the most impor tant
single i tem of assets, it is also, they i n d i -cate, the most
stable asset. Owned land is the basis for c red i twor th i -ness.
In the language of the R C S : "the value of owned land w o u l d
also p robab ly represent the measure in relat ion to wh ich the
credit w o r t h i -ness of most cu l t i va t ing families was
judged by credit agencies." (Survey Report, pp 115 and 137. See
also p 132 and p 564.)
This has long been an outstanding feature of the ru r a l credit
posit ion
' Survey Report, p 115. Near the end of this same volume it is
stat-ed : "The requirements for me-d ium- te rm and long-term
credit are comparat ively larger than those for short-term credi t
. " (P 1012)
953
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SPECIAL NUMBER JUNE 1960 T H E E C O N O M I C W E E K L Y
954
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T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960
in I n d i a . As they say in the N o r t h , "a man's haisiyat
is h is l a n d " . A f t e r a l l , i t is not a "cu l t i va ted
h o l d i n g " wh ich walks over to the moneylender's verandah and
seeks to obta in a loan. Rather it is a peasant who comes f r o m a
fami l y wh ich may have been deal ing w i th the moneylender and
the moneylend-er's forefathers fo r one or more generations. The
moneylender is l ike ly to know a good deal about the peasant's f
am i l y , to have a fa i r idea about the var ious f a m i l y
mem-hers and what they are do ing . A l -though the loan may be
extended to one member, the moneylender, in effect, is g i v i ng
credi t to the fam i l y . In do ing so, the moneylender gives
heavy weight to the sol id assets of the f a m i l y , among which
there is no th ing so good as fu l l y owned land that the f am i l
y , i f need be, can pledge and alienate. The heart of the ru ra l
credit structure in Ind ia is the re la t ionship between the credi
tor and the fami ly -cum- fami ly assets. As against these realit
ies, the Com-mittee of D i rec t ion chose to concent-rate on an
abstract ion cal led the "cu l t i va ted h o l d i n g " . I n
their pre-occupat ion w i t h this al leged " u n i t of fa rm
business", the Commit tee never even bothered to ask on any of thei
r schedules the size or type of the f am i l y , the number of f am
i l y members, the number of adul ts, or the number of wo rk ing
members—-surely matters of s igni f icance fo r bo r row ing and
lend ing.
O W N E R S H I P D A T A N O T T A B U L A T E D
The Survey Report states that, despite the fundamental impor
tance of the "ownersh ip ho ld ings " in terms of investment and as
a basis for b o r r o w i n g ' these cannot be as-certained from
the general schedule data per ta in ing to 127,000 fami l ies . " F
o r the fami l ies investigated using the General Schedule" , we
read, " there is no ind icator of re lat ive economic posi t ion
other than the size of cu l t ivated h o l d i n g . " Regard ing
the relat ion of debt w i t h the assets of the cu l t iva tor , i
t is asserted: " I n -fo rmat ion on this po in t is avai lable
only th rough the intensive enquiry." ' {Survey Report, pp 08 and
115)
Since the point is of paramount s igni f icance, let us t u rn
to the general schedule. I t begins w i t h an in t ro-ductory
group of questions wh ich locate and ident i fy the household, i ts
head, caste and occupat ion. Then fol lows a b lock of 14 questions
per-ta in ing to land wh ich are reproduced
unchanged as f o l l o w s :
2.1 Do you own any land?
2.2 If so. what is its area?
2.3 What is the land revenue you pay to Government?
2.4 Have you leased out any part of land owned by you?
2.5 If so. what is its area?
2.6 Have you taken any land on lease?
2.7 If so. what is its area?
2.8 Have you given possession to a credi tor under usufruc-tuary
mortgage any part of land owned by you?
2.9 IT so. what is its area?
2.10 Have you in your possession as credi tor under
usufructu-ary mortgage any land?
2.11 If so. what is its area?
2.12 Tota l area under your cul t i -vat ion ( i nc lud ing
current fa l low} du r i ng the current agr icu l tu ra l year?
2.13 Number of plough cattle owned
2.14 Strat i f ied serial number
Technical Report, p 965.
Clear ly, the RCS collected data on "ownersh ip ho ld ings"
against Ques-tions 2.1 and 2.2 of the general schedule. Detai led i
n fo rma t ion on the leasing and mor tgag ing of land must have
been obtained f r o m the subsequent Hems. What , then, is the
meaning of the assertion, quoted above, that the general schedule
yields "no indicator of relative eco-nomic posi t ion other than
the size of cul t ivated h o l d i n g ? " Inc red ib le as it may
sound, the fact is that data on ownership holdings (a long w i th
the leasing and mor tgag ing data) were collected but not
tabulut-ed. Kef e r r i ng to the general sche-du le questions on
land, the Survey-Report states that " the ma in objec-t ive of the
questions regard ing hold-ings was to obtain estimates of the size
of cul t ivated holdings, so that its relat ion to size of recorded
trans-actions such as bor rowings and re-payments might be
examined." The in tent ion, it is exp la ined, was "no t to enquire
into the assets, i e, the capi ta l wor th of the cu l t i va t ing
fami l y , but into the size of its busi-ness resources, the main
constituents
955
of wh ich are the cul t ivated ho ld ing and l ivestock" .
(Survey Report, P 115)
Thus the Committee of D i rec t ion obtained and held in the i r
hands data on the most impor tan t assets of their o r i g ina l
sample of 127,000 famil ies. In thei r preoccupat ion w i t h "cu l
t ivated ho ld ings" , they pu t these data aside and never made
use of them. Later, when they found that for many purposes data on
assets were more impor tant than data on " f a r m business", they
had to make do w i th materials f r o m the intensive enqui ry per
ta in ing only to 9,000 fami l ies .
PRICE OF POLICY ORIENTATION
It may be that the Committee's preoccupat ion in 1951-52 w i th
" c u l -t ivated ho ld ings ' ' bore some relat ion to an impor
tan t change in pol icy then occur r ing in agr icu l tu ra l credi
t in Bombay. At that t ime the Bombay Slate Cooperat ive Bank, and
the Bombay cooperat ive movement in general, were exper iment ing w
i th a shift away f r om credit l inked w i th assets (ownership ho
ld ings) to cre-d i t l inked w i t h product ion (cul t ivated ho
ld ings ) . In this they had the blessings of the Reserve Bank. The
Rural Credi t Survey of the Reserve Bank was l a id out in such a
way as to fac i l i ta te the collection of data per ta in ing to
cu l t iva t ion, cul t ivated holdings, and crop loans. One of the
chief recommendations that emerg-ed f rom the Rural Credit Survey
was precisely a shift of this nature on an A l l - I nd ia basis: a
shi f t f r o m the "asset-nexus"" to the "p roduc t ion -nexus" .
In p lann ing their Survey perhaps the Commit tee of
Di rect ion al lowed themselves to be carr ied away by their v
is ion of what rura l credit ought to be or become, at the expense
of get t ing a balanced account of the structure of r u ra l credit
as it actual ly was.
A f te r all the f ield work was over, the Committee found that
the sum total of quant i ta t ive data collected d id not add up to
a sufficient basis for the analysis of the credit needs of peasant
fami l ies . The i r materials were inadequate fo r descr ib ing
either total economic ac t iv i ty or overal l assets posi t ion of
the peasant cu l t i -vators. For the peasant sector the Commit tee
could asses.neither stocks nor flows. The Committee were,
therefore, in no posit ion to deal with such complex topics as
investment and disinvestment, capital fo r rnat ion
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SPECIAL NUMBER JUNE 1960 THE ECONOMIC WEEKLY
savings and deficits, shifts in income and f low of funds. T h i
s is in 'fact conceded in the chapters of the Sur-vey Report
devoted to these topics ' The hundreds of pages in wh ich these
subjects are discussed lead nowhere.
U N S U I T A B L E C O N C E P T U A L
F R A M E W O R K
The RCS failed to get the data needed for an understanding of r
u r a l credit because its conceptual frame-work was unsuited to
the I n d i a n countryside. The f a r m business ap-proach wh ich
the Committee of Di rec t ion adopted had been develop-ed in the U
K and the U S A where the economic organizat ion of ag r i -culture
is qui te different. In those countries f a r m i n g is car r ied
on main-ly as a business. Regular accounts are maintained, and p
rof 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
rm families keep for home con-sumpt ion are usually t r i v i a l
as com-pared w i t h total p roduc t ion . The usual practice in
Amer i can f a r m business studies has been to ignore these
retentions fo r home use.
In Ind i a , by contrast, food crops are g rown 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 India ' s r ice and wheat enters
the m a r k e t , ' The amounts which are kept by the peas-ants for
thei r own food represent the great bu lk of the product . Even
among agricul tur is ts who no rma l ly sell part of the i r output
, o n l y a minor i ty 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 prof i t but a here-d i t a
ry occupation ca r r i ed on chiefly w i t h f ami ly labour for f
a m i l y suste-nance. They keep no books and reckon no costs. An
ag r i cu l tu ra 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 inext r icably woven in
to the fab-r ic o f peasant f ami ly l i f e . To r i p cul t ivat
ion 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 rea l i ty
' Cf, Government of Ind ia . First Report of the National Income
Committee. (New Delh i , A p r i l . 1951 . p 3 0 ; also.
Government of Ind 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 (New D e l h
i , 1957) . "pp 188-89 and 44-45.
i n I n d i a .
Qual i ty of the D a t a
The method of f ie ld w o r k upon which the RCS rel ied almost
exclu-sively was that of o ra l in te rv iew. For th is purpose, as
we have seen, a series of schedules were prepared and taken around
i n the sample v i l -lages. AH data obtained by inter-v iewing are
subject in one degree or another to what has been called the "er
ror of response." Th i s is the possibi l i ty 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 wi th sensitive
subjects on w h i c h questions may be resented, e.g., boot-legging
, se l l ing o p i u m , sex relations, gambl ing , 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 ion their annual costs for mainte-nance, repair
, depreciat ion, and re-placement. Fur ther , there are enqui-ries
wh ich put questions for wh ich the experience of the respondent
has not prepared h i m . It is not that these are necessarily
complex ; it is s imply that the respondent may not know what to
make of them. In communit ies wi thou t clocks respond-ents should
not be asked to state in exact numer ica l terms how many hours a
day they w o r k ' F ina l ly , any battery of questions that is
very long runs the r isk of so weary ing the respondent that he may
end 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.
ERRORS OF R E S P O N S E
The RCS invi ted large e r rors of response on each of the
counts just listed. In the first place, debt is a pa in fu l
subject, not l i ke ly to be discussed easily or candid ly w i t h
anyone, let alone casual strangers ca r ry ing formidable
questionnaires. Quite a significant p r o p o r t i o n of
creditor-debtor relations in v i l lage India are on the f r inge
of the law, or pay no heed to the law. Such relations are often fur
t ive and sur-repti t ious. Even when they are open and flagrant,
the peasant may not be prepared to ta lk about them wi th
outsiders. To the peasant, the
moneylender is l i k e l y ' to be "at once a necessity and a
ter ror" .* The peasant m i g h t l i k e to curse h i m , bu t may
f ind i t wiser to kep m u m .
Some of the most impor t an t ques-tions were so couched that
accurate answers could h a r d l y have been ex-pected. An example
of a compl i -cated i t em r e q u i r i n g the respondent to make
a series of mental compu-tations is found in the general sche-dule.
Under the broad topic of "cap i ta l expendi ture" the heads of
127,000 famil ies were asked how many rupees they had spent d u r i
n g the preceding twelve months on capi ta l expendi ture in
non-farm business' The recall pe r iod was long . The po in t where
f a r m i n g gives way to "non- fa rm business" may be obscure, as
in the case of conver t ing sugarcane ju ice into gur (unref ined
sugar ) . The dis t inct ion between capi tal expenditures and
other expenditures-—say in renovat-ing a wooden l o o m — i s
delicate. I t is not su rpr i s ing , therefore, that only 5 per
cent of all those interviewed reported any capi ta l expendi ture
whatsoever on non-farm business.+
Under the rub r i c of capital invest-ment in agr icu l ture ,
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 ion of f a r
m houses, cattle sheds, etc." Fur ther along in the same schedule,
under the rub r i c , " f a m i l y expendi ture" , he was asked
how many rupees he had spent d u r i n g the preceding twelve
months on the "construct ion and repair of residen-t ia l houses
and other bu i ld ings" . But how was he to dis t inguish ex-pendi
ture under this head f rom the previous question ("const ruct ion
of fa rm houses etc.") when, as is so
' A l t h o u g h i t pertains to X V I t h Century England,
there is much of comparat ive interest in the mast-e r ly in t
roduc t ion by R H Tawney to his edi t ion of Thomas Wilson's
Discourse upon Usury' London , Bell and Sons. 1925. See in par-t
icular , pp 17-30.
+ Survey Report, p 550. It is not easy to fol low the
instructions to the field staff for the recording of this i tem. As
reproduced in the Technical Report, these read : " A n y f o r m of
business expenditure in-cur red on current account as wel l as
purchase of supplies fo r re-sale or speculation purposes should be
entered . . . " Technical Report, p 13.
956
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T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960
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 the i r cash receipts f rom sale
of var ious types of crops and livestock products . T h i s sort
of
question would have presented l i t t l e difficulty to the
peasants i f , as in
large u rban shops, they made out sales sl ips for each
transaction and kept regular business accounts. India ' s peasants,
needless to say, f o l -low no such practise. Those who do sell
crops, sell them at different times of the year, in different
am-ounts. There may be relat ively large sales after the harvest of
the p r inc ipa l crop, smaller sales after the harvests of the
lesser crops, i r re-gular sales of m i l k , eggs, pou l t ry , f
r u i t , vegetables, etc. The peasant's style of l i f e does not
put h i m in a posit ion to answer quant i ta t ive ques-tions
about cash sales. The best he r a n do, under persistent p rodd ing
f rom 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
num-ber and to the length of thei r sche-dules and questionnaires.
I f 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 rd ina
ry octavo-size volume. N o t all the questions were put to any one
f a m i l y ; about ha l f of them were put to each of the 9,000
famil ies covered by the intensive enqui ry and a num-ber of
schedules were filled up a second t ime on a r e tu rn vis i t .
Hence. about 66 pages of octavo size were used up for each of these
9,000 famil ies .
W i t h regard to capi ta l expendi-ture in agr icul ture the
Survey Re-port ra i ls at tention to another source of weakness in
the data. The RCS treated capi ta l expendi ture in agr i -culture
under three main heads; purchase of land, purchase of l ive-stock,
and "other capi tal expendi-ture in agr icu l tu re" . This last g
roup included expendi ture on land reclamation, bunding , wells and
other i r r i ga t i on resources, new orch-ards, purchase of
implements and
' ' T h e general schedule used in the Rural Credit Survey is
reproduced, a long 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 ion , and
miscellaneous. In the actual returns, la rger sums were re-corded
under "other capital expen-di tures" than under either purchase of
land or purchase of livestock. The qua l i ty of the data for the
various items treated under "other capital expenditure in agr icu l
tu re" 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 regard ing the coverage of various items or groups
of items there was inevi tab ly some varia-t ion in the in te rpre
ta t ion of these instructions. W h i l e i n some i n -stances the
Investigators t r i ed to cover even the smallest expendi-tures and
obtained reports f r o m a very large p ropor t ion of famil ies ,
in others the repor t ing seems to have been confined to on ly
expen-d i ture of a large size, and is, therefore, reported fo r
only a small p ropor t i on of families. Var ia t ions f rom dis t
r ic t to d is t r ic t in the propor t ions of famil ies i n c u r
r i n g expenditure in re la t ion to pa r t i -cular items may be
due pa r t l y to such va r i a t ion in in te rpre ta t ion ,"
(Survey Report, p 638.)
S i m i l a r l y , the returns for par t i -cular groups of f
ami ly expendi-ture, the ..Survey Report states, show large and i r
regula r variations, especially in regard to the p ropor t ion of
famil ies repor t ing expenditure in various distr icts :
" I n a l l items, i nc lud ing items re la t ing to expendi
ture on cere-monies, there appears to have been some var ia t ion
in interpreta-t ion of the scope of the questions. At one extreme,
almost 100 per cent of the respondents in pa r t i -cular districts
were reported as hav ing incur red expenditure on many of the i
tems; at the other extreme, reports of on ly exception-a l ly large
expenditures were evi-dently entered in the general sche-dule owing
to a somewhat nar row interpretat ion of the scope of the i tems."
(Survey Report, pp 402-03.)
CROP OUTPUT ESTIMATE
When schedule design flouts the first pr inciples 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 ou t tu rn of c rop" .
" V a l u e of p roduce" data were ob-tained only f r o m the
9,000 intensive enqu i ry famil ies . The RCS attached considerable
impor tance to the calcu-lation of a figure in rupees for the total
value of crop ou t turn d u r i n g the year for each of these
families. For purposes of analysis, the inten-sive enqui ry fami l
ies were g r o u p e d ' by "value of gross p roduce" as wel l as
by number of acres cul t iva ted . 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 cul t ivated acreage figure.
Weigh t ing , averaging, and inflat-ing the sample data to nat
ional p ro -port ions, the Committee emerged w i t h a 1951-52 A l
l - I n d i a figure fo r gross value of crop produce of Rs 2,921
crores (or , in terms of thous-ands of mi l l ions , of Rs 2 9 . 2
) . (Sur-r ey Report, pp 1064-66.) As ag-ainst their own figure,
the Commit-tee cite the figure subsequently ob-tained by the Na t
iona l Income Com-mittee of the Government of Ind i a . This
official figure, they had expect-ed, w o u l d be qui te close to
the i r own . The Nat iona l Income Com-mittee figure fo 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 mi l l i ons , Rs 48 .8
) . Thus the National I n -come Committee figure is 67 per cent
higher than the RCS estimate. The RCS Committee of Di rec t ion
take the h igher figure as more authorita-t ive than their own .
Thus 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 product ion was a sensitive subject in
1951-52. In most of the States of I n d i a there was at the t ime
one or another type of governmental control of sugar and
foodgrains: procurement, price con-t r o l , r a t ion ing , or a
combinat ion of these The effectiveness of these controls v a r i e
d ; so d i d the degree of b lackmarket ing . In this context, the
Committee observe, the peasantry may have understated the physical
quantit ies of 'foodstuffs produced. Fur thermore , the prices
which the peasants reported to the investigators may have been
lower than the .ones at wh ich they really sold. There was
957
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SPECIAL NUMBER JUNE 1960 T H E E C O N O M I C W E E K L Y
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T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960
no at tempt at objective ver i f ica t ion, whether of acreage,
or yields, or of r u l i n g prices.
In the second place i t is difficult to secure i n f o r m a t i
o n on all crops at one t ime . The Committee report that the RCS
investigators concen-t ra ted on the m a i n crop, whether food
grains or indus t r ia l crops l ike cotton and sugarcane' T h e
mino r crops in each area were under-emphasised or even altogether
neg-lected. Taken as a group , however, these minor crops account
for 25 per tent or more of the value of total crop product ion
.
Fur thermore , as we have noted above, the I n d i a n peasantry
do not keep p roduc t ion records. I t was too much to expect them
to rattle off de-ta i l after detai l of crop acreage, y ie ld ,
and scle pr ice . 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. What 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 Di rec t ion . W h i l e some matters
can be probed f ru i t fu l ly by oral interview, there are others
which require direct , phy-sical observation. Data for many of the
items included in the RCS questionnaires could have been ob-tained
only by s ta t ioning investiga-tors w i t h small groups of
households throughout the per iod of enqu i ry . Fur thermore , to
secure re l iable i n -fo rmat ion , those investigators w o u l d
have needed thorough t r a i n i n g as wel l as f a m i l i a r i
t y w i t h the subject matter in its local setting. Th i s type of
work , of course, could scarcely have been car r ied out on an a l
l - Ind i a scale in a single survey l im i t ed to a single
year.
Design of the Survey We may recall that, according to
the instructions f rom the Reserve Bank, the Committee of D i
rec t ion were to plan an A l l - I n d i a Survey w h i c h would
cover all agr icu l tura l strata in representative parts of the
country . The selection of units to be studied was made in three
stages. The first stage was the selection of 75 out of India ' s
302 adminis t ra t ive districts. In the second stage, 600 villages
were selected, 8 in each of the 75 sample distr icts . Every f ami
ly in these 600 villages, 127,000 famil ies 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 cu
l t iva t ing fami-lies i n each of the 600 sample v i l -lages. In
this way, 9,000 families were chosen for detailed study by means of
the intensive schedules.
The purpose of conducting a sample survey on an Al l - Ind ia
scale is obviously to ob ta in A l l - I n d i a data. It is only
reasonable to assume that what the Reserve Bank expected f rom the
RCS as a basis fo r formu-la t ing nat ional ru ra l credit po l i
cy were, f i rs t ly, A l l - I n d i a results and, secondly,
breakdowns for the major regions. As we have noted, the Committee
of D i r ec t i on reported in December, 1952, that they were
pre-pa r ing A l l - I n d i a and regional tables.
As tabulat ion and analysis pro-ceeded, however, the Committee
of Di rec t ion seem to have lost confi-dence in the representative
nature of the data wh ich had been collected. They came to the
conclusion that their materials could not be used to make va l id
estimates cither for Ind ia as a whole or for any major region of
the country. The data, we read in the Summary p r in ted in 1955.
"are representative of only the selec-ted units of the sample".
(Summary of Survey Report, 1955, p 4.)
" P E C U L I A R N A T U R E O F S A M P L E
Instead of A l l - I n d i a averages or propor t ions , the
text tables in the Survey Report give figures for "the 75 districts
taken together". ' C f . the tables given at pp 293, 533, 550 and 5
7 1 ) . Al te rna t ive ly , we f ind innumerable frequency dis t r
ibut ions of the 600 sample villages or of the 75 districts. The
Committee, how' er, no t i fy us at. the outset that "in presenting
a frequency d i s t r ibu t ion of the 75 districts in respect of
any character measured, such as ou t ' s tanding debt, no c la im
is made that the d i s t r ibu t ion of the 302 distr icts from wh
ich the sample was drawn w o u l d show the same pattern. This is
due to the peculiar nature of our sample Notwi ths tanding the
largeness of the sampl ing propor-t ion , namely, one in four, and
the fact that the sample covered a l l tracts of the country, it
would be wrong to assume that the pattern of d i s t r ibu t ion
for the country as a whole is accu-rately depicted in the d i s t r
ibu t ion of the sample." (Survey Report, p 1 1 ) . S imi la r
disclaimers are issued ag-ainst t ak ing the findings f rom the
eight villages in any distr ict as re-presentative of a l l
villages in that d is t r ic t . We are to ld that "the dis-
959
t r ic t data mean, for 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 are made w i th respect to
States and regions larger than States.
The Committee of Di rec t ion , in fact, wou ld have us believe
that to get representative data was not one o f their p r i m a r y
aims. " [ O u r ] main objective", they have wr i t t en , "was a
study of conditions, not neces-sar i ly of areas identif ied w i t
h cer-ta in names or w i t h fu l l areas but w i t h samples of va
ry ing condit ions throughout the country. .. " {Sur-vey Report, p
1 0 ) . The Survey was planned, they tell us, "not w i t h a view
to obta in ing estimates for the country as a whole, of size of
aver-age outstanding debt, bor rowings or repayments, but was
directed chiefly towards ob ta in ing an idea of the w o r k i n g
of the agr icul tura l credit system in regions representative of
ai l types of condit ions exist ing in the count ry" . (Survey
Report, p 162) . The sample of districts, we are told, was d r awn
"not particular-ly w i t h a view to mak ing v a l i d estimates
for the .102 districts as a whole" (Survey Report p 11) .
DRAWING OF SAMPLE DISTRICTS
The method by which the sample of distr icts was d r a w n is
rather obs-cure. In a progress report made in A p r i l , 1952,
tile Committee of Direc-t ion informed the Reserve Hank that a
strat if ied random sampling proce-dure had been fol lowed.
"For 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 ga t i on .
A certain num-ber of distr icts was then selected f rom each region
on the random sampling m e t h o d "
Subsequently, however, in the author i ta t ive Summary Report
(pub-lished in 1955) no statement was made on how the distr icts
were selected. Th i s is puzzling, all
' Reserve Bank of India , Standing Advisory Committee on Agr i
cu l tu -ral Credit Proceeding' of the Se-cond Meeting, held in
Bombay on 24th and 25th April 1952 (Bombay. Reserve Bank. 1952) , p
34.
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SPECIAL NUMBER JUNE 1960 T H E E C O N O M I C W E E K L Y
the more so since the mode of selec-t i o n of the sample vil
lages is des-cr ibed in precise statistical langu-age as " o n the
random sampl ing basis w i t h p r o b a b i l i t y of selection p
ropor t iona l to the popu la t ion of the v i l l age . " The
phrase "at random' ' is also used to characterize the selec-t i o n
of intensive enqu i ry 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 explanat ion of the way the 75 distr icts
were chosen in the f u l l vers ion of the Survey Report w h i c h
appeared in 1956. As against this reticence in regard to the distr
icts , we read in Chapter 1 that the villages "were selected w i t
h p r o b a b i l i t y propor-t ional to popu la t ion" , and that
the famil ies for the Intensive Survey were chosen "a t r a n d o m
" after stra-t i f ica t ion . (Survey Report' pp 12 and 5.)
By contrast, in the Technical Re-port (publ ished at the end of
1956) we come again upon the c la im that the selection of the
distr icts was "at r andom" , this t ime, however, in two versions
w h i c h are not qui te con-sistent. F r o m the in t roduc to ry
dis-cussion of "Selection of Sample Uni t s , " i t w o u l d
appear that the procedure had included strat i f icat ion 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 le should be representative of the geographical and
ag r i cu l tu ra l re-gions of the country . T w o factors
representative of ag r i cu l tu ra l con-di t ions wh ich were
taken in to con-sideration fo r th is purpose are the percentage
area under cash crops and the percentage area under i r r i -gat
ion. Subject to considerations regard ing these two factors and
geo-graphica l representativeness, the selection of the 75 distr
icts was made at r andom f r o m among the 302 dis-t r ic 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 would seem to have
been unstrati-f i ed s imple random s a m p l i n g :
"The first stage in the sampl-i n g process was the selection of
dis t r ic ts at random and w i t h equal p robab 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 contradic t ion i s reflected in the descript ion of the
overall sampl-
i n g scheme in the Technical Re' port as "multi-stage w i t h
stratific-at ion at some of the stages." (Techni -cal Report, p
1037. I ta l ics added
— D T ) . W e know that w i t h i n each sample' d is t r ic t
the vi l lages were stratif ied in to those w i t h w o r k i n g
credit societies and those w i t h o u t We also know that the
famil ies w i t h i n each sample v i l l age were strat if ied in
to ten groups according to size of cul t ivated holdings . The only
stage in respect of which i t is not quite clear whether there was
stra-t i f ica t ion or not is the first , t h e s e -lect ion of
the sample distr icts . The phrase, "s t ra t i f icat ion at some
of the stages," evades the question w i t h regard to the first
stage.
W A S T H E S A M P L E R A N D O M ?
Return ing to the problem of whe-ther the 75 dis tr icts were in
fact d r a w n at random, we note that the discussion of sampl ing
errors of estimates in the Technical Report refers on ly 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 dis t r ic t . No attempt is made
to discuss or calculate the sampl ing er ror 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 distr icts . (Technical Report, pp
1035-45.) Th i s omission would be just i f iable only i f the
districts had not been selected at random. The ambigu i ty of the
RCS in res-pect of the randomness of the first-stage sample may
provide a clue to the unusual h u m i l i t y displayed in respect
of the va l i d i t y and represent-ativeness of the data.
At the outset, the Committee of Di rec t ion fa i led to define
the p r i -mary a im of the survey. Given the available resources,
they were not in a pos i t ion to obta in estimates of good r e l i
ab i l i t y bo th fo r I n d i a as a whole and 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 wou ld per-force have had to conform s t r ic
t ly to the p r inc ip les of random selec-t ion of sample units .
T h e y would also have done better to scatter the 600 sample
villages more w i d e l y throughout 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 par
t icu la r distr icts to be
studied m i g h t w e l l have been select-ed purposively in the
l i g h t o f the Committee's p r i o r knowledge and par t icular
interests. In th is case, the 600 sample vi l lages migh t more f r
u i t f u l l y have been concentrated in a much smaller number of
districts than 75, in order to ensure greater accuracy of
representation at the dis t r ic t level .
The design wh ich was adopted appears to represent an unhappy
compromise between conf l ic t ing ob-jectives. I t was efficient
neither for ob ta in ing A l l - I n d i a estimates nor fo r obta
in ing district-wise estimates.
D I S T R I C T A S B A S I C U N I T
The Survey Repor t states that the adminis t ra t ive d is t r
ic t was taken as the "basic u n i t ' ' of study for the reason
that : " this was the smallest un i t for w h i c h i t was
possible to present a compara t ive ly f u l l p ic ture of the
credit system on its 'demand1
side and also on the ' supply ' side at various levels," The
study was directed, we are to ld , towards ob-ta in ing "integrated
d is t r ic t samples of the w o r k i n g of r u r a l credit
ma-chinery ." (Survey Report, pp 9 and 11).
To a im at an integrated d i s t r i c t p ic ture of the demand
and supply of ru ra l credi t is to seek the non-existent. Credi t
operations in the I n d i a n countryside are, above a l l , local
and unorganized. Loans are advanced ch ie f ly by vi l lage
money-lenders or traders who funct ion as l i t t l e monopolists.
There may be thousands of separate " ce l l u l a r " cre-d i t
markets of this type in a single d is t r ic t . The heart of the r
u r a l cre-di t p r o b l e m in I n d i a has been pre-cisely the
discreteness of money-lender-borrower relationships. I t was
premature, to say the least, to speak of the " w o r k i n g of r u
r a l credit ma-ch inery" at the d is t r ic t level . In most of r
u r a l I n d i a machinery had not yet developed for b r i n g i n
g supply and demand together at any level h igher than the vi l
lage.
There was, however, one special sense in which the adminis t ra
t ive dis t r ic ts served as units in respect of r u r a l credit
. In the officially spon-sored co-operative movement each dis t r
ic t , no matter how large or how 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 programme of w o r k i n g th rough one, and
only one, of these Central Banks in every dis-t r i c t already had
the suppor t of
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T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960
the Reserve Bank . This p o l i c y was strongly re-affirmed in
the recom-mendations of the Committee of Di rec t ion . I t i s
possible that in, fo-cussing the RCS on the dis t r ic ts the
Committee were influenced by their interest in strengthening the
net-work of Dis t r ic t Central Co-operative Banks.
SECOND-STAGE SAMPLE
The second stage of the sampling process was the selection of 8
v i l -lages in each of the 75 distr icts . Th i s meant that 75
different sampl-ing fract ions were employed. Eight out of 334
villages were taken in S i roh i d is t r ic t of Rajasthan, and
eight out of 10,517 villages in M i d -tmpur d is t r ic t of West
Bengal. In S i roh i , then, the second-stage sampl-ing f rac t ion
was roughly 1 vil lage out of 40, whereas in M i d n a p u r i t
was 1 out of 1,300.
In point of fact, two random samples of four vil lages each were
d r a w n in each dis t r ic t , each sample being d rawn
separately. The f i rs t sample of 4 villages in each dis t r ic t
was d r awn f rom a list of villages reported to contain w o r k i
n g p r i -mary cooperative credit societies. The second sample of
4 villages in each dis t r ic t was d rawn f rom a l ist of the
remaining villages in that d i s t r ic t—that is, villages without
w o r k i n g p r i m a r y cooperative credi t societies.
The reason for d r a w i n g this two-fo ld 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 wel 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 1951 . Most
recent of these was the Rura l Banking Enqui-ry Committee, the
headquarters of wh ich had been in Bombay, at the Reserve Bank. The
Report of the Rura l Bank ing E n q u i r y Committee, signed in M
a y , 1950, commented as follows on the place of coopera-tives in r
u r a l credi t : " A s yet they cover a very smal l p ropor t i on
of
Technical Report, p 1. Fo r the terms of reference of the RCS,
see Survey Report, V o l 1, Par t 2, p 704, and the General Report,
p 3.
the ru r a l people and meet only a f rac t ion of their credi t
requirements, and, except in a few regions, their w o r k i n g has
not been very satisfac-tory ."† ln this judgment , the Rural Bank
ing E n q u i r y Committee fol lowed closely the views expressed
in the 1945 Report of the A g r i c u l -tura l Finance
Sub-Committee of the Policy Committee on Agr icu l tu re , Forestry
and Fisheries, appointed by the Government of I n d i a .
By selecting hal f of the sample villages f r o m the relatively
small number of vi l lages in wh ich coope-ratives were func t ion
ing , the Com-mittee of Di rec t ion 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 Commit tee were
con-cerned more w i t h their prospective policy recommendation for
a vast expansion of cooperatives than w i th the actual func t
ioning of credi t in the ru ra l areas at the t ime of the
Survey.
T h e F i n d i n g s
I t would be gratui tous, in view of the foregoing, to w a r n
that the RCS "findings"' have to be approached w i t h c i
rcumspect ion. The fact that the RCS data appear in books bear-ing
the Reserve Bank's monogram does not raise them, ipso facto, to the
level of statistical currency of the republ ic .
The RCS " f i n d i n g " wh ich receiv-ed the greatest at
tention in the newspapers and publ ic discussion pertains to the
place of coopera-tives in the total ag r i cu l t u r a l credit
supply " p i c t u r e " . Out of a l l credit advanced to cult
ivators, the Survey Report states, cooperatives supply only 3.1
percent. By contrast, moneylenders (bo th professionals and agricul
tur is ts who also do some lending) supply about 70 percent. The
rest is said to come f rom "rela-tives'", f rom "traders" , f rom "
land-lords" (to their tenants) , f rom Gov-ernment and f rom
commercial b a n k s . ' ' " T h e utter insignificance
† Report of the Rural Banking Enquiry Committee (Government of
Ind i a , M i n i s t r y of Finance, Department of Economic
Affairs , New De lh i , 1953) , pp 46-47.
Survey Report. V o l I , Part 2 (Credi 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 bor rowings in the past
year f r o m the suppl iers .
of the volume of credi t suppl ied to the cul t iva tor by the
cooperative movement" the Committee of E r e c -t i o n wr i te ,
was perhaps " the most s tar t l ing 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 minor , insignificant , etc. The new element contr ibuted by
the RCS consisted in the apparent sta-t is t ical precision wi th
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 wh ich migh t have advanced credit to their
neighbours. Thus, on the supply side, no quanti tat ive i n fo rma
t ion whatsoever was collect-ed f r o m the most impor tant source'
of r u r a l credit .
Instead, the credit supply p ic ture has been b u i l t up f rom
replies to questions about borrowings on the demand schedules. This
procedure might 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 wh ich had taken loans;
(2) the amounts borrowed were correctly stated;
( 3 ) the agencies f r o m which the loans had been taken were
proper ly iden t i f i ed ; and
( 4 ) the answers were accurately wr i t t en down 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 f u l f i l l ed . Since no
system of cross-checking was bu i l t in to the design of the
de-mand schedules, and no objective ver i f ica t ion was
attempted, no con-fidence can be placed in numerical values derived
f rom these data.
Even if the data on total borrow-ings and the sources of these
bor-rowings were of unexceptionable qual i ty , the fact remains
that be-cause of the peculiar nature of the RCS sample, the 127.000
families
9 6 1
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SPECIAL NUMBER JUNE 1960 T H E E C O N O M I C W E E K L Y
f r o m which this in fo rmat ion was gathered may not
constitute a pro-bab i l i ty sample of r u r a l famil ies in I n
d i a . I f the 75 distr icts were not selected at random, we have
no way of knowing how the facts about bor-rowings by these par t
icu la r 127,000 families wou ld compare w i t h data on the
borrowings of the universe o f I nd i an ru ra l families, In sum,
the range of uncertainties is such thai the RCS does not provide a
basis for saying whether the actual con t r ibu t ion of the
cooperatives to the supply of r u r a l credit was 1 percent, 3
percent, 6 percent, or even 9 percent.
I t is therefore remarkable that the Committee of Di rec t ion
permit-ted themselves to ca r ry the calcula-t i on beyond the
decimal point . Of al l fresh borrowings by cu l t iva t ing famil
ies , d u r i n g the year 1951-52, we are in fo rmed , 3.1 percent
were f rom cooperatives. W i t h regard to their total outstanding
debt (as dist inguished f r o m loans taken dur-ing the Survey
year) we learn that exactly 3.7 percent of the total was owed to
"cooperatives and commer-c ia l banks together". Statement of the
propor t ions owed by cu l t iva t ing families to different
agencies in tenths of percents w o u l d appear un-warran ted on
the basis of materials in which , we are t o l d , "Separate data
on debt owed to cooperatives and commercia 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 whom 46.8 percent was owed, and agr
icu l tur i s t money-lenders to whom 25.2 percent was owed, the t
h i r d most impor tan t group, to whom 11.4 percent of al l
outstanding debts was due, was "relat ives". (Surrey Report, Vo
lume I , Part 2 , pp 2-3) Nowhere in the RCS materials do we f ind
a defini-t ion of this category. The extent to w h i c h "rela t
ives" overlapped w i t h moneylenders. traders or money-lending
agricul tur is ts is unknown. Kven apart from "relat ives",
con-fusion in the ident i f icat ion of lend-ers was inevitable, in
view of the prevalence in many areas of per-sons whose activities
encompassed both t rad ing and money lending. Since the RCS supply
categories were not mutua l ly exclusive, the significance of the
figures given for the' share of total debt to any one becomes
dubious,
CAPITAL FOBMATION ESTIMATE
The Commit tee of D i rec t ion have also put fo rward an A l l
- I n d i a esti-mate of gross capi tal fo rmat ion by ru ra l
famil ies in 1951-52. In view of the "great general interest" in
capital format ion , the Committee w r i t e ' they have made an
exception to their '"general ru l e" against pre-senting overall
total estimates for the whole count ry . For purposes of this
estimate the Committee u t i l ize A l l - I n d i a averages (i e,
averages of the data f r o m a l l 75 dis tr icts) of the amounts
pa id out per f ami ly d u r i n g the year on account of b u i l d
-ing construction, on account of "ca-pi ta l expenditure in
non-farm busi-ness'' and on account of "cap i t a l expenditure in
agr icu l ture exclud-i n g land and livestock purchase".
Expenditures f a l l i ng in these three categories are added up
separately for cu l t i va t ing families and non-cu l t iva t ing
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 f ami ly in r u r a l I n d i
a . The total amount a r r i ved at in this fashion is Rs 650
crores. In the Survey Report the Committee make much of this f
igure wh ich , they term "very h i g h " , and take as ind ica t
ing that capital format ion was much higher than usually estimated.
(Survey Report, Rural Families, pp 710, 720, and 728)
Mo scientific standing attaches, to this estimate of Rs 650
crores. It is put together in large part f rom data recorded in
response to un-answerable questions. We have mentioned above the
difficulties in-herent in the i tem on "non- fa rm business". There
were also, we have noted, wide variat ions in the way the
investigators understood the instructions on what to record under
the head of "other capital expendi ture in agr icu l tu re" .
More impor tan t , in a country l ike India no set of data l im
i t ed to ex-penditures can suffice to bu i l d up a sound estimate
of capital fo rmat ion . Because of its par t ia l and discrete
character, the RCS material on r u r a l families cannot be
aggregated to furn ish overal l measures of this type. Despite the
considerable growth of interest in capital fo rm-at ion, the RCS
figure has been v i r -tual ly ignored in serious discussion of the
subject. Even subsequent Reserve Bank publicat ions wh ich refer to
capi ta l format ion have left this RCS " f i n d i n g " out of
consider-a t ion .
NATURE OF TABULATIONS Aside f r o m the handful of un-
reliable A l l - I n d i a estimates, the RCS " f ind ings" are
brought together in the frequency dis t r ibut ions 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 cu l t
iva t ing famil ies on purchase of livestock fell between Rs 100
and Rs 200. Since we have been warned not to infer f rom this
circumstance that the average annual expendi ture of cult ivators
for livestock w o u l d be f rom Rs 100 to Rs 200 in about one out
of every six villages in I n d i a , the i n fo rma t ion is of
decidedly l imi t ed interest.
W i t h i n the villages, the distr icts , the States and the
Regions, many items of in fo rmat ion are g iven se-parately for
various classes of cul t i -vators. The average amount bor-rowed
per fami ly , for example, is reported not only for a l l families
and for all cu l t iva t ing famil ies but also for the " b i g cul
t iva tors" , the ' l a r g e cul t iva tors" , the " m i d d l e
cul -t ivators" and the "small cul t iva tors" . These four labels
s igni fy respective-ly (he first decile, the first three de-ciles,
the four centre deciles and the lowest three deciles of the whole
list of cu l t i va t ing families ranked by size of cul t ivated
ho ld ing .
As we know, "the d iv i s ion into . . . strata | deciles | was
made separate-ly for each village'', (Survey Re-port, p 823.
Italics added—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 four clases of cul t iva tors— 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 vi l lage, the terms have a
different meaning in respect of each vi l lage. As soon as data for
b i g cult ivators f rom one village are taken together w i t h
those for b ig cult ivators i n another v i l -lage, a heterogenous
mass of f ami -lies is gathered up into a single class. Condit ions
vary so wide ly that even in ad jo in ing 'districts the smallest
cul t ivated holdings in one village may. in absolute physical
terms, equal or even exceed the largest cult ivated holdings in
ano-ther v i l lage . To collate data refer-r ing , for example, to
the upper three deciles in a vi l lage of d w a r f holders
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T H E E C O N O M I C W E E K L Y SPECIAL NUMBER JUNE 1960
w i t h data collected f r o m the upper three deciles; in a vi
l lage where large holdings predominate, is to cumulate i n fo rma
t ion about two altogether dissimilar groups of cul -t ivators. Yet
this is exactly what has been done in numerous dis tr ic t , State
and regional tables.
A s imi lar d ispar i ty characterizes the g roup ing of
intensive enqui ry families in to classes according to value of
gross produce. The Sur-rey Report concedes that data so presented
do not lend themselves to use for analyt ic purposes ;
" l t is obvious that the compo-sit ion of classes of cu l t iva
tors by value of gross produce is extreme-ly m i x e d ; each class
contains various types of fanners ho ld ing relat ively very
different positions in their respective fa rming econo-mies. A
farmer from among the top strata in a low monetized eco-nomy and a
lower strata farmer f rom a h igh ly monetized economy may both fal
l in the same class of value of gross produce. In the various
classes grouped according to average value of gross produce,
different proport ions f rom different regions and thus w i t h
different degrees of commercial i -zation or intensity of f a rming
, etc. would have been inc luded .
"lt wou ld 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 disproport ionate emphasis on those elements in the ru ra l
scene which fitted in w i t h the Commit tees pre-conceptions as to
the way in which the credit system should be recon-structed. Hence
the focus on " f a r m business"; the preoccupation wi th cult
ivated holdings at the expense of ownership hold ings ; the
adoption of the adminis t ra t ive dis t r ic t as the basic uni t
of the Survey; and the undue weigh t ing given, in the choice of
sample villages, to villages in which cooperative societies were
funct ioning. The programme wh ich the Committee of Direc t ion
subse-quently recommended to the Reserve Bank envisaged a vast h
ierarchy of State and dis t r ic t banks dispensing credit through
vil lage cooperatives in accordance w i th the product ion needs of
business-like, market-oriented farmers. Th i s was not. of
course, the way credit was actually funct ioning in r u r a l I
n d i a a t the time of the Survey. The design of the enqui ry
followed the lines of a vision of the future rather than those of
the exis t ing structure of credit in the countryside.
Insofar as the a i m was to provide a sound factual basis for
the formu-lation of long-term ru r a l credi t policy, the RCS was
a fai lure. The Committee of Di rec t ion sacrificed completeness
of f a m i l y coverage in order to ca r ry through a nat ionwide
survey in a single year. Rut they d id not succeed in p roduc ing
either valid or reliable estimates for I n d i a as a whole.
Imprope r use of the survey method ensured unre l i ab i l i ty ,
while weakness of design led to poor representativeness.
There can be no question that an investigation of rura l credit
in Ind ia
has to grapple w i t h p rofound diffi-culties. What is
unfortunate is. that the Committee of Di rec t ion clut-ched at
q