Debt and Investment Survey

An Underutilised Tool
The exhaustive All-India Debt and Investment Survey is an important source of information on rural credit markets for financing and policy-making bodies. Conducting the survey more frequently on a smaller scale, instead of the current decadal exercise, making it user-driven, and above all quick release of reports would improve its relevance considerably.
K J S SATYASAI
he All-India Debt and Investment Survey (AIDIS) is one of the exten sive decennial statistical exercises conducted in the country. Started in 1951-52, the survey is conducted once every 10 years. AIDIS 1991 is the latest in the series its results were out in 1998, about seven years after the field survey. Hardly have the results reached the public than the next survey is already around the corner. The paper by Rao and Tripathi (EPW, May 12, 2001) is, perhaps, the first one based on AIDIS 1991 apart from the two articles published in the RBI Bulletin in May 1999 and February 2000. Salient findings of the 1991 survey have been examined in these papers and compared with those of earlier surveys. We comment on a couple of key findings of the 1991 survey, the mode of its conduct and the recommendations of the National Statistical Commission [GoI 2001] on AIDIS. Two important findings of the 1991 survey are worth mentioning here. First, there is large-scale under-reporting of debt. The survey found that the estimated outstanding debt, at all-India level, owed to cooperatives and commercial banks formed a mere 26 per cent of the credit reported by these institutions through various returns in 1991, i e, the under-reporting was to the extent of 74 per cent. The degree of under-reporting has increased compared with 1981, when it was around 64 per cent. Rao and Tripathi (2001) have established under-reporting in terms of outstanding credit but did not examine the number of rural households for any under-reporting, as there could be multiple borrowing from different agencies. The 1991 survey reported that 32 per cent (after reckoning multiple financing) of rural households were indebted to one agency or another in 1991. Only 15.6 per cent of the rural households reported debt to institutional sources and 20 per cent to non-institutional sources. It is difficult to reconcile with such a low incidence of debt among households in view of the spread of the network of rural credit institutions and extensive implementation of poverty-alleviation programmes involving credit component on the one hand and increasing investment/working capital needs of agriculture on the other. The second, more disturbing finding is that the share of institutional sources in the outstanding debt of rural households has declined from 61.2 per cent in 1981 to 56.6 per cent in 1991 for the country as a whole. Disturbing because, in spite of the widespread network of credit institutions and credit-linked government programmes, private moneylenders still accounted for over one-third of the cash dues of rural households in 1991; in fact, their share March 2, 2002

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increased during this period. It is worth remembering here that in the 1980s, the countrys largest credit-linked anti-poverty programme, the Integrated Rural Development Programme (IRDP), was implemented on a massive scale covering on average 3.5 million families annually. Moreover, recent evidence from some parts of the country shows that even during the late 1990s private moneylenders remained an important source of rural credit [Bhaumick 2000 and Singh 2001]. The persistence of private moneylenders may be due to their non-substitutability which emanates from their ability to manoeuvre, through money-lending, the inter-linkages among input-output markets through complex and variegated contractual arrangements. There is interstate variation in the extent of dependence of rural households on private moneylenders. Three sets of factors, relating to production environment, living conditions and awareness levels of households explain the variation. It is observed that even in agriculturally developed states like Andhra Pradesh, Haryana and Punjab, the dependence on non-institutional credit agencies increased during the 1980s. Fertiliser use per hectare, per

capita consumption expenditure and proportion of households without literate members representing, respectively, production environment, living conditions and awareness explained the interstate variation in the dependency on informal credit [Satyasai and Viswanathan 2001]. It is often opined that dependence on private moneylenders is not always undesirable and hence their share in the indebtedness of households is not of any consequence. This is only partly true. The fact is that households with low asset base and non-cultivating households are largely dependent on private agencies. That means the access of such vulnerable sections to institutional sources needs to be improved. Such findings should evoke required responses in policy and planning circles within the banking system. This brings us to the question of the utility of AIDIS in credit planning and policy-making.

Survey Delayed is Survey Denied

Much time has elapsed between the survey year 1991-92 and the publication of the reports by NSSO in five volumes in 1998. The time-lag is so great that if

the survey results are mentioned in any forum, the usual response is that the data are outdated. But with respect to the year the results are made public, the data are fresh! Thus, the survey results purportedly lose relevance and acquire limited academic value. They would not, therefore, serve any purpose other than being a benchmark for comparison in future. Delays of this nature were not uncommon in such surveys earlier. But a similar time lag during earlier decades must not have reduced the relevance of the survey results as it did during the 1990s. The main reason for this is the sweeping turnround in the economic philosophy during the 1990s, reflected in the new economic policy and financial sector reforms. Different signals went down to major players in rural credit during this decade about the priorities of the planners. More emphasis has been laid on the profitability and viability of the rural financial agencies two concepts that received lower priority a decade earlier vis-a-vis the social objective of purveying more and more credit to larger numbers of rural people. New prudential norms, asset classification and income recognition norms were made applicable gradually to all rural financial institutions

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including cooperatives. Non-performing assets (NPAs) became an important tool for monitoring the health of the institutions, and strict provisioning norms were enforced. In essence, the policy environment has changed dramatically over the decade. Due to these changes in the management of the financial system, rural credit has been under great pressure. Commercial banks interest in rural credit is on the decline. Many cooperatives and regional rural banks are in the red and not in a position to raise resources and lend on a sustainable basis. No wonder the market shares of different agencies have changed, with the relative share of private moneylenders being more now compared with 1991. Another development that might have influenced the rural credit market during the decade has been upscaling of microfinance operations in the country, focusing on linking of self-help groups (SHGs) with banks. This must have led to changes in the market shares of different credit agencies. Evidence based on a study of 11 states shows that informal credit agencies gave way to SHGs largely during the late 1990s as revealed by their relative shares in the credit availed by the sample households [Puhazhendhi and Satyasai 2000]. Now the question is that if the results lose relevance fast what is the utility of the survey which involves huge costs. One related question is, who are the users of the survey? Ideally, the survey is a very important source of information about rural credit markets for the market players (existing and potential entrants) as well apexlevel refinancing, planning and policyformulating bodies. The survey presents the market shares of various credit agencies. It also portrays the demand-side picture as it covers the purposewise credit use by different categories of households according to asset base, social group affiliation and other factors. The data are readily available for the states and can be obtained for different regions within a state with some effort. It does not appear, however, that institutional agencies have been using such surveys in furtherance of their business. Instead, they seem to be pursuing walk-in business and mandatory lending. Other users in government and other bodies may not be using the survey results except, if at all, to include a paragraph or two in their presentations. The only users of the survey might be researchers submitting papers to journals/seminars to add to their biodata. Under such general lack of concern for the results of such a massive survey, what should be the future strategy?

In this context, it is heartening to note that the National Statistical Commission (NSC), under the chairmanship of C Rangarajan, has recognised the importance and relevance of the survey when it states:
Data on this segment are available neither regularly nor on an ad hoc basis except that certain pieces of information are collected and are available from various sources. Among different sources of statistical information on informal financial sector, the data from All-India Debt and Investment Survey (AIDIS) are available at decennial intervals and provide information on composition of assets, capital formation, and indebtedness of rural and urban households. A distinguishing feature of the AIDIS is the collection of loanwise details such as credit agency (institutional and noninstitutional), rate of interest, duration of loan, purpose, etc. The non-institutional agencies refer to the landlords, moneylenders, traders, relatives and friends, doctors, lawyers, etc. The data collected through AIDIS are used in the compilation of National Accounts.

The commission recommended that the National Sample Survey Organisation (NSSO) continue to conduct the AIDIS at decennial intervals with an improved coverage through pooling estimates of central and state samples on the one hand and by increasing the sample size on the other. A couple of comments about the commissions recommendations would be in order. First, the commission has examined the survey in the context of availability of statistical information on the informal financial sector. That is, the focus is on the supply side again. The market information (demand-side) the survey can provide would be very helpful in the business development planning of the suppliers. Still no reference to the relevance of AIDIS to formal credit agencies from this angle is made. Second, the scope of the survey could be enlarged by including a new class of rural credit agencies known as microfinancing institutions, including SHGs, NGOs and NBFCs. The commission chose to recommend a separate quinquennial survey of SHGs and NGOs by NABARD. Third, the commission felt it necessary that the RBI and the NSSO should have a close collaboration in the conduct of AIDIS. As of now, the RBI is involved in technical matters. According to Shetty (2001), the commission could have recommended the involvement of RBI in financing the AIDIS. However, we feel that merely involving RBI alone in AIDIS financially, is not enough. The utility of AIDIS comes out fully if and only if all the possible users

participate in designing it besides sharing the costs. The main users of the survey can be scheduled commercial banks including regional rural banks, cooperatives, MFIs including NBFCs, urban cooperative banks, NABARD and RBI. Cost-sharing helps enlist deeper involvement. In essence, the survey should be user-driven and have user orientation. Lastly, the commission is for continuing the surveys at decennial intervals. But frequent surveys on a smaller scale would possibly have greater utility than the large-scale surveys at decadal intervals. More importantly, small-scale surveys giving quicker results would be more meaningful than large-scale surveys whose results are eternally awaited. Frequent surveys would further help to bring out the effects of policy interventions, most of which are crowded out in decennial surveys. Timely dissemination of the survey results is another important aspect to be taken care of. The results should be quickly disseminated through hard copies as well as via the Internet. NSSO deserves appreciation for making the AIDIS data available in ASCII format on payment on CDs/ floppy diskettes, however user-unfriendly the supporting information on variable description and data format may be. It is true that AIDIS is exhaustive and it takes time to collect, compile, analyse data and prepare reports. But one cannot resist the temptation of comparing it with another decennial exercise, the population census. The latest census for 2001, was concluded in March 2001 and the preliminary results were available the very next month in press releases and on the Internet! -29
[Views expressed here are those of the author alone and usual caveats apply.]

References
Bhaumik, S K (2000): Rural Rate of Interest for Institutional Credit in India: A Study with Reference to West Bengal, Occasional Paper No 15, NABARD, Mumbai. GoI (2001): Report of the National Statistical Commission, New Delhi, Government of India, Chairman C Rangarajan, on the Web at: http://www.nic.in/stat/nscr/hp.html Puhazhendhi, V and K J S Satyasai (2000): Microfinance for People: An Impact Evaluation, National Bank for Agriculture and Rural Development, Mumbai. Satyasai, K J S and K U Viswanathan (2001): Persistence of Informal Moneylenders in Rural Credit Markets, (communicated), NABARD, Mumbai. Shetty, S L (2001): Report of National Statistical Commission A Comment, Economic and Political Weekly, December 1. Singh, A K (2001): Rural Informal Credit Market in Uttar Pradesh, Occasional Paper No 17, NABARD, Mumbai.

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