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Is Access to Loan Adequate for Financing Capital Expenditure? A Household-level Analysis on Some Selected States of India

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  • Meenakshi Rajeev

Abstract

This paper attempts to identify the factors that determine access to credit for financing capital expenditures across selected developed, less developed and middle performing states in India. Using a double hurdle model, it shows that access to credit is generally governed by supply side constraints and that household demand is interest rate inelastic. It further shows that educational status of the household plays an important role in gaining access to credit and therefore, improving education could be considered as one of the policy prescriptions by which access to credit can be improved.

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  • Meenakshi Rajeev, 2015. "Is Access to Loan Adequate for Financing Capital Expenditure? A Household-level Analysis on Some Selected States of India," Working Papers id:7880, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:7880
    Note: Institutional Papers
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    1. Diagne, Aliou & Zeller, Manfred & Sharma, Manohar, 2000. "Empirical measurements of households' access to credit and credit constraints in developing countries," FCND briefs 90, International Food Policy Research Institute (IFPRI).
    2. Manojit Bhattacharjee & Meenakshi Rajeev, 2012. "Repayment of Short Term Loans in the Formal Credit Market: The Role of Accessibility to Credit from InformalSources," Working Papers 273, Institute for Social and Economic Change, Bangalore.
    3. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    4. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
    5. Manojit Bhattacharjee & Meenakshi Rajeev, 2010. "Interest rate formation in informal credit markets in India: does level of development matter?," Global Development Institute Working Paper Series 12610, GDI, The University of Manchester.
    6. Tullio Jappelli, 1990. "Who is Credit Constrained in the U. S. Economy?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(1), pages 219-234.
    7. Ranjula Bali Swain, 2002. "Credit Rationing In Rural India," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 27(2), pages 1-20, December.
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