Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

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

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

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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