Directed credit and investment in small scale industry in India: evidence from firm-level data 1965-78
AbstractPanel 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 1965â78 in their investmentâsales ratio.
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Bibliographic InfoPaper provided by Department of Economics, University of Sussex in its series Discussion Papers in Economics with number 02/97.
Date of creation: Oct 1997
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Other versions of this item:
- Robert Eastwood & Renu Kohli, 1999. "Directed credit and investment in small-scale industry in India: Evidence from firm-level data 1965-78," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 42-63.
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