Credit Controls in India with Special Reference to Agricultural Commodity Prices

This paper attempts to assess the influence of selective credit policies on bank credit and their impact, in turn on prices for selected agricultural commodities rice, wheat, sugar, cotton, jute and groundnut. The study observes that for all commodities, price changes with a lag of one or two months activise Selective Credit Controls (SCCs). Tightening of sCCs has a negative and significant impact on the real outstanding bank credit of rice, wheat, sugar and jute. The ratchet effect of the lagged real bank credit on the current level has been found significant in all commodities. The real outstanding bank credit, a proxy for stock, has a negative influence on commodity prices.