One way to answer such questions is to gauge rural credit outstanding per person in each state. To do that, I’ve taken the rural credit outstanding for each state as on 31 March 2008 from RBI data and divided it by the rural population in each state according to the 2001 census. Sure, that overstates rural credit per capita because the population must have grown since 2001. Nevertheless, because we don’t have reliable recent data on state-wise population since then, I’ve taken the 2001 data to arrive at the rural credit per head in each state. The idea is to look not so much at the absolute numbers, but to see the difference between the various states. Per capita bank credit for the states will obviously vary widely, given different degrees of industrialization. But surely rural India should be more egalitarian?

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Not at all, as the data in the accompanying chart shows. As you can see, rural credit per capita varies widely, from Rs10,266 in the Goan countryside to a low of Rs753 in rural Nagaland. These are, of course, extremes. Rural Goa is hardly representative of India, with its large tourist influx and small population. On the other hand, Nagaland, with its inaccessible hill villages and insurgency, is also not representative. Hill states such as Sikkim and Himachal Pradesh are also not typical, because most parts of the states are classified as rural and the populations are small. But there’s no denying the fact that while rural credit per capita is as high as Rs6,912 in Punjab, it’s as low as Rs833 in Bihar. Contrast Tamil Nadu, with credit per person in the rural areas at Rs4,624 and Chhattisgarh, at Rs1,309 or Jharkhand at Rs1,324. These areas are part of the mainstream and reflect the inequalities in rural development.

Graphics: Ahmed Raza Khan.

RBI data on rural credit outstanding is also available for each district in the country. The results are eye-popping. Although for Bihar as a whole rural credit outstanding per capita is Rs833, it’s as low as Rs371 per person in Madhubani district, Rs433 per capita in Darbhanga district and Rs443 in Sitamarhi. In other words, rural credit outstanding per person in Madhubani district is less than half of the average in Bihar and one-tenth of the average in Andhra Pradesh. Surely the microfinance people should be doing their bit for Bihar, instead of being concentrated in the south? In Nagaland’s Mon district, rural credit outstanding per head is as low as Rs225. In Manipur’s Ukhrul district, 140,000 people in the rural areas share the princely credit outstanding of Rs8 lakh.

There is wide variation within states. For example, while Saharanpur district in Uttar Pradesh has per capita rural credit outstanding of Rs3,387, that for Ghazipur, on its eastern border, is less than one-third of that, at Rs971. In Maharashtra, while the figure for Pune district is Rs3,031, that for extremist-hit Gadchiroli is Rs1,101. In Chhattisgarh, extremist-haunted Dantewada district has a per capita outstanding of Rs824 in rural credit. The country’s east gets far less rural credit.

The data shows gross inequalities in rural and farm credit in the country. Note also that these are averages—the poor will have far less access to credit than the rich farmers in every district. Is this the failure of the banks, a failure of governance or just uneven development in agriculture? It’s probably a mix of all three.

Manas Chakravarty takes a weekly look at trends and issues in the financial markets. Your comments are welcome at capitalaccount@livemint.com

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