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Directed credit and investment in small-scale industry in India: evidence from firm-level data 1965-78

journal contribution
posted on 2023-06-08, 09:09 authored by Robert Eastwood, Renu Kohli
Panel data on 788 modern sector Indian firms during 1965-78 are used to analyse the link between the size of a firm and its financial environment. Exogeneity tests reveal that large firms with improved investment prospects could obtain external finance at the margin, but that small firms could not. The policy of directing bank credit accordingly relaxed a binding constraint on small firms, raising investment. Assuming that all of the rise in the credit-sales ratio in small firms was policy-induced then so was about one third of the 170 per cent rise during 1965-78 in their investment-sales ratio.

History

Publication status

  • Published

Journal

Journal of Development Studies

ISSN

0022-0388

Publisher

Taylor & Francis

Issue

4

Volume

35

Page range

42-63

ISBN

0022-0388

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-02-06

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