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What determines the household decision to borrow for investment or repayment of old debt? The Indian story

Author

Listed:
  • Moumita Poddar
  • Tanmoyee Banerjee
  • Ajitava Raychaudhuri

Abstract

Borrowing for investment in either physical or human capital promotes growth while that for consumption or debt repayment may lead to so called 'debt-trap' for the households. The present paper probes deeper into the decision-making process of the households regarding choice between these alternative borrowing. The data comes from All India Debt and Investment Survey (NSS 70th round). These methods used are Cragg's Box-Cox double hurdle model and instrumental variable (IV) probit model. Our study shows the decision to borrow for investment purposes depends on such factors as gender, religion, location, education, asset position as well as on the status of financial inclusion of households. The decision to borrow for repayment of existing debt is most prevalent among urban educated households in addition to land-owning rural borrowers.

Suggested Citation

  • Moumita Poddar & Tanmoyee Banerjee & Ajitava Raychaudhuri, 2022. "What determines the household decision to borrow for investment or repayment of old debt? The Indian story," International Journal of Information and Decision Sciences, Inderscience Enterprises Ltd, vol. 14(1), pages 60-84.
    • Handle: RePEc:ids:ijidsc:v:14:y:2022:i:1:p:60-84
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