Discuss the importance of credit in …

The only factor which can ensure higher productivity in agriculture in rural economy is Capital. It can grow only if it has an adequate flow of finance. Provision of rural credit enables a farmer to buy fertilisers, improved seeds of organic pesticides and equipment. All these inputs help him to increase his agricultural productivity and income. Credit is the lifeline of farming activity. Because:

1. Most farming families in India are small and marginal holders, producing just enough for subsistence. They seldom generate surplus for further investment.
2. Gestation period between sowing and harvesting is quite long. This necessitates borrowing for the purchase of inputs. 

So, the importance of credit in rural development can be perceived as a means to break the vicious circle of low capital, low productivity and low savings of the rural poor.