Evaluating the Impact of Institutional Credit on Sustainable Income and Livelihoods in the Dairy Farming Sector: Evidence from Tamil Nadu, India

Institutional credit plays a crucial role in enhancing agricultural productivity and improving farmers’ livelihoods by enabling investment in productive assets and technologies. This study evaluates the impact of access to institutional credit on income, employment generation and farm mechanization among dairy farmers in Tamil Nadu. Primary data collected from dairy households were analysed using an Endogenous Switching Regression (ESR) model to account for selection bias arising from farmers’ credit access decisions. The results reveal that dairy households with access to institutional credit earn significantly higher farm income and generate greater annual surplus than comparable households without credit access. Institutional credit also facilitates technology adoption, and mechanization in dairy farming. The findings underscore the pivotal role of institutional credit in promoting sustainable income and strengthening livelihood security among dairy households. The study highlights the need to expand timely and affordable access to institutional credit as a key policy instrument for enhancing the resilience and long-term sustainability of the dairy sector.