Startseite The Political Economy of Sectoral Credit Provisioning in India: An Empirical Analysis
Artikel
Lizenziert
Nicht lizenziert Erfordert eine Authentifizierung

The Political Economy of Sectoral Credit Provisioning in India: An Empirical Analysis

  • Deepti Kohli EMAIL logo
Veröffentlicht/Copyright: 12. Oktober 2021
Veröffentlichen auch Sie bei De Gruyter Brill

Abstract

Electoral dynamics is believed to have a direct bearing on the scope of governmental control over the supply of credit to different economic sectors. This paper attempts to examine the impact of opportunistic electoral manipulations, ideological beliefs and political lobbying on the supply of agricultural and industrial credit across the Indian states. The findings indicate that more competitive elections are associated with increases in credit provision. An incumbent party with a more liberal ideology is found to provide greater average credit to agriculture relative to industry. Finally, an increase in the political contributions provided to an incumbent state government is found to entail greater industrial credit and lower agricultural credit, on an average.

JEL Classification: D72; D73; E59; P16

Corresponding author: Deepti Kohli, Assistant Professor, Department of Economics, Swami Shraddhanand College, University of Delhi, New Delhi, India, E-mail:

Appendix

Ideologies of national and state-level political parties in India

Name of party Political ideology Ideological stand
Aam Aadmi Party Social Democratic, Populist Centre
All India Anna Dravida Munnetra Kazhagam Social Democratic, Populist Centre
All India Trinamool Congress Social Democracy, Left-wing Populism, Democratic Socialism, Regionalism, Civic Nationalism, Secularism, Anti-Communism Centre-Left
Assam Gona Parishad Populist, Democratic Liberalism Right-Centre
Biju Janata Dal Populist, Economic Liberalism Right-Centre
Bhartiya Janata Party Economic Liberalism Right
Bahujan Samaj Party Dalit Socialism, Socialism Left-Centre
Communist Party of India Communism Left
Communist Party of India (Marxist) Communism Left
Dravid Munnetra Kazhagam Social Democratic, Populist Centre
Haryana Vikas Party Social Democratic, Populist Centre
Indian National Congress Democratic Socialism, Social Democracy Centre
Indian National Lok Dal Populist Economic Liberalism Right-Centre
Janata Dal Populist Economic Liberalism Right-Centre
Janata Dal (Secular) Populism, Social Democracy Centre
Janata Dal (United) Integral Humanism, Conservatism Right-Centre
Janata Party Populist, Economic Liberalism Right-Centre
Jammu and Kashmir National Conference Moderate Separatism, Pro-India, Re-unification of Kashmir Centre
Jammu and Kashmir People’s Democratic Party Regionalism Centre
Jharkhand Mukti Morcha Regionalism Centre-Right
Left Democratic Front Communism Left
Left Front Communism Left
Lok Dal Populist, Economic Liberalism Right-Centre
Mizo National Front Left-wing Populism, Mizo Nationalism, Socialism, Social Liberalism, Democratic Socialism Centre-Left
Manipur People’s Party Regionalism Centre-Right
Nationalist Congress Party Democratic Socialism, Populist Centre
Naga People’s Front Regionalism Centre
Rashtriya Janata Dal Democratic Socialism, Populist Centre
Shiromani Akali Dal Religious (Sikh), Populist, Economic Liberalism Right-Centre
Sikkim Democratic Front Democratic Socialism Centre-Left
Sikkim Krantikari Morcha Democratic Socialism Centre
Shiv Sena Economic Liberalism Right
Samajwadi Party Populist, Democratic Socialism Centre
Telugu Desam Party Regionalist, Fiscally Conservative Right
United Democratic Front Populist, Democratic Centre
United Democratic Party Regionalism, Populism Centre-Right
YSR Congress Party Regionalism Centre

References

Arellano, M., and S. Bond. 1991. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.” Review of Economic Studies 58: 277–97.10.2307/2297968Suche in Google Scholar

Arellano, M., and O. Bover. 1995. “Another Look at the Instrumental Variable Estimation of Error Components Models.” Journal of Econometrics 68: 29–51.10.1016/0304-4076(94)01642-DSuche in Google Scholar

Association for Democratic Reforms. 2019. “Analysis of Donations from Corporates and Business Houses to National Parties for Financial Year 2016-17 and 2017-18.” New Delhi.Suche in Google Scholar

Auerbach, A. J., and Y. Gorodnichenko. 2017. “Fiscal Stimulus and Fiscal Sustainability.” NBER Working Paper No. 23789. Available online at https://www.nber.org/papers/w23789.10.3386/w23789Suche in Google Scholar

Auerbach, A. J., Y. Gorodnichenko, and D. Murphy. 2020. “Effects of Fiscal Policy on Credit Markets.” NBER Working Paper No. 26655. Available online at http://www.nber.org/papers/w26655.10.3386/w26655Suche in Google Scholar

Bardhan, P. 1984. The Political Economy of Development in India. Oxford: Blackwell.Suche in Google Scholar

Bardhan, P., and D. Mookherjee. 2000. “Capture and Governance at Local and National Levels.” American Economic Review 90: 135–9.10.1257/aer.90.2.135Suche in Google Scholar

Batra, N., and M. Kumar. 2017. “Factors Impacting Geographical Distribution of Directed Lending: A Study of Indian Banking.” Savings and Development 41: 1–31.Suche in Google Scholar

Bhattacharjee, G. 2014. “The Reality of Special Category States.” Economic and Political Weekly 49: 48–56.Suche in Google Scholar

Blundell, R., and S. Bond. 1998. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.” Journal of Econometrics 87: 115–43.10.1920/wp.ifs.1995.9517Suche in Google Scholar

Boardman, A. E., C. Laurin, M. A. Moore, and A. R. Vining. 2009. “A Cost-Benefit Analysis of the Privatization of Canadian National Railway.” Canadian Public Policy 35: 59–83.10.3138/cpp.35.1.59Suche in Google Scholar

Boycko, M., A. Shleifer, and R. Vishny. 1996. “A Theory of Privatization.” Economic Journal 106: 309–19.10.2307/2235248Suche in Google Scholar

Burgess, R., and R. Pande. 2005. “Can Rural Banks Reduce Poverty? Evidence from the Indian Social Banking Experiment.” American Economic Review 95: 780–95.10.1257/0002828054201242Suche in Google Scholar

Burgess, R., G. Wong, and R. Pande. 2005. “Banking for the Poor: Evidence from India.” Journal of the European Economic Association 3: 268–78.10.1162/jeea.2005.3.2-3.268Suche in Google Scholar

Carvalho, D. 2014. “The Real Effects of Government-Owned Banks: Evidence from an Emerging Market.” Journal of Finance 69: 577–608.10.1111/jofi.12130Suche in Google Scholar

Chodorow-Reich, G., G. Gopinath, P. Mishra, and A. Narayanan. 2020. “‘Cash and the Economy: Evidence from India’s Demonetization.” The Quarterly Journal of Economics 135: 57–103.10.3386/w25370Suche in Google Scholar

Coate, S., and S. Morris. 1995. “On the Form of Transfers to Special Interests.” Journal of Political Economy 103: 1210–36.10.1086/601449Suche in Google Scholar

Cole, S. 2009. “Fixing Market Failures or Fixing Elections? Agricultural Credit in India.” American Economic Journal: Applied Economics 1: 219–50.10.1257/app.1.1.219Suche in Google Scholar

Das, S. 2014. “Commercial Banks and Industrial Finance in India: The Pre-Liberalisation Scenario.” Business Studies 35: 1–23.Suche in Google Scholar

Dash, B. B., and A. V. Raja. 2012. “Political Determinants of the Allocation of Public Expenditures: A Study of the Indian States.” NIPFP Working Paper No. 2012-101. New Delhi.Suche in Google Scholar

Dash, B. B., and S. Mukherjee. 2014. “Political Competition and Human Development: Evidence from the Indian States.” The Journal of Development Studies 51: 1–14.10.1080/00220388.2014.947280Suche in Google Scholar

Dinc, S. 2005. “Politicians and Banks: Political Influences on Government-Owned Banks in Emerging Countries.” Journal of Financial Economics 77: 453–79.10.1016/j.jfineco.2004.06.011Suche in Google Scholar

Election Commission of India. 2015. “Background Paper on Political Finance and Law Commission Recommendations.” New Delhi.Suche in Google Scholar

De Figueiredo, J. M., and B. S. Silverman. 2006. “Academic Earmarks and the Returns to Lobbying.” Journal of Law and Economics 49: 597–625.10.3386/w9064Suche in Google Scholar

Faccio, M. 2006. “Politically Connected Firms.” American Economic Review 96: 369–86.10.1257/000282806776157704Suche in Google Scholar

Faccio, M., and H. Hsu. 2017. “Politically Connected Private Equity and Employment.” The Journal of Finance 72: 539–74.10.1111/jofi.12483Suche in Google Scholar

Faccio, M., R. W. Masulis, and J. J. McConnell. 2006. “Political Connections and Corporate Bailouts.” The Journal of Finance 61: 2597–635.10.1111/j.1540-6261.2006.01000.xSuche in Google Scholar

Fisman, R., D. Paravisini, and V. Vig. 2017. “Cultural Proximity and Loan Outcomes.” American Economic Review 107: 457–92.10.3386/w18096Suche in Google Scholar

Gordon, S., C. Hafer, and D. Landa. 2007. “Consumption or Investment? On Motivations for Political Giving.” Journal of Politics 69: 245–61.10.1111/j.1468-2508.2007.00607.xSuche in Google Scholar

Grenzke, J. 1989. “Shopping in the Congressional Supermarket: The Currency is Complex.” American Journal of Political Science 33: 1–24.10.2307/2111251Suche in Google Scholar

Gupta, S., and C. W. Swenson. 2003. “Rent-Seeking by Agents of the Firm.” Journal of Law and Economics 46: 253–68.10.1086/345579Suche in Google Scholar

Haque, T., and S. Verma. 1988. “Regional and Class Disparities in the Flow of Institutional Agricultural Credit in India.” Indian Journal of Agricultural Economics 43 (3): Paper No. 272093, doi:10.22004/ag.econ.272093.Suche in Google Scholar

Karnik, A., and M. Lalvani. 1996. “Interest Groups, Subsidies and Public Goods: Farm Lobby in Indian Agriculture.” Economic and Political Weekly 31: 818–20.Suche in Google Scholar

Khwaja, A. I., and A. R. Mian. 2005. “Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market.” The Quarterly Journal of Economics 120: 1371–411.10.1162/003355305775097524Suche in Google Scholar

Kumar, N. 2019. “Political Interference and Crowding Out in Bank Lending.” Journal of Financial Intermediation 43, https://doi.org/10.1016/j.jfi.2019.02.001.Suche in Google Scholar

Langbein, L. I. 1986. “Money and Access: Some Empirical Evidence.” Journal of Politics 48: 1052–62.10.2307/2131013Suche in Google Scholar

Marshall, T. R. 1997. “Bundling the Cash: Why Do Interest Groups Bundle Donations?” American Review of Politics 18: 291–308.Suche in Google Scholar

Miranda-Pinto, J., D, Murphy, K. J., Walsh, and E. R., Young 2020. “Saving Constraints, Debt, and the Credit Market Response to Fiscal Stimulus.” Working Papers 202007, Federal Reserve Bank of Cleveland, https://doi.org/10.26509/frbc-wp-202007.Suche in Google Scholar

Mohanty, N. 2013. “The Special Category State Conundrum in Odisha.” Institute of Studies in Industrial Development, Working Paper No. 156.Suche in Google Scholar

Murphy, D., and K. J. Walsh. 2020. “Government Spending and Interest Rates.” Darden Business School Working Paper No. 2634141. Available online at: https://ssrn.com/abstract=2634141 or https://doi.org/10.2139/ssrn.2634141.Suche in Google Scholar

Oke-Bello, A. M., and A. K. Toriola. 2019. “The Nexus Between Fiscal Deficit and Domestic Credit in Nigeria.” KIU Journal of Social Sciences 5: 35–46.Suche in Google Scholar

Poole, K. T., and T. Romer. 1985. “Patterns of Political Action Committee Contributions to the 1980 Campaigns for the U.S. House of Representatives.” Public Choice 47: 63–112.10.1007/BF00119353Suche in Google Scholar

Poole, K. T., T. Romer, and H. Rosenthal. 1987. “The Revealed Preferences of Political Action Committees.” American Economic Review 77: 298–302.Suche in Google Scholar

Potrafke, N. 2009. “Does Government Ideology Influence Political Alignment with the U.S.? An Empirical Analysis of Voting in the UN General Assembly.” Review of International Organizations 4: 245–68.10.1007/s11558-009-9066-5Suche in Google Scholar

Powell, L. W. 2013. “The Influence of Campaign Contributions on Legislative Policy.” A Journal of Applied Research in Contemporary Politics 11: 339–55.10.1515/for-2013-0047Suche in Google Scholar

Pursell, G., and A. Gulati. 1993. “Liberalizing Indian Agriculture: An Agenda for Reform.” Policy Research Working Paper, The World Bank WPS 1172.Suche in Google Scholar

Raina, S., and S.-J. Xu. 2019. “Trading Credit (Subsidies) for Votes: The Effect of Local Politics on Small Business Lending.” Working Paper (2019-505). https://doi.org/10.2139/ssrn:3396699.10.2139/ssrn.3599539Suche in Google Scholar

Ramakumar, R. 2013. “Bank Credit to Agriculture in India: Trends in the 1990s and 2000s.” The Marxist 3: 1–11.Suche in Google Scholar

Reserve Bank of India. 2002. “Report on Trend and Progress of Banking in India.” Mumbai.Suche in Google Scholar

Reserve Bank of India. 2018. “Report on Trend and Progress of Banking in India.” Mumbai.Suche in Google Scholar

Reserve Bank of India. 2019a. “Handbook of Statistics on Indian States.” Department of Economic and Policy Research, Reserve Bank of India, Mumbai.Suche in Google Scholar

Reserve Bank of India. 2019b. “State Finances: A Study of Budgets of 2019-20.” Department of Economic and Policy Research, Division of State Finances, Reserve Bank of India, Mumbai.Suche in Google Scholar

Silva, F. B. G. 2020. “Fiscal Deficits, Bank Credit Risk, and Loan-Loss Provisions.” Journal of Financial and Quantitative Analysis First View 1–53.10.1017/S0022109020000472Suche in Google Scholar

Tripathi, M., S. Anasolabehere, and J. M. Snyder. 2002. “Are PAC Contributions and Lobbying Linked? New Evidence from the 1995 Lobby Disclosure Act.” Business and Politics 4: 131–55.10.2202/1469-3569.1034Suche in Google Scholar

Vining, A. R., and A. E. Boardman. 1992. “Ownership Versus Competition: The Causes of Government Enterprise Inefficiency.” Public Choice 73: 205–39.10.1007/BF00145092Suche in Google Scholar

Wright, J. R. 1985. “PACs, Contributions, and Rolls Calls: An Organizational Perspective.” American Political Science Review 79: 400–14.10.2307/1956656Suche in Google Scholar

Zaheer, S., F. Khaliq, and M. Rafiq. 2017. “Does Government Borrowing Crowd out Private Sector Credit in Pakistan.” SBP Working Paper Series 83, State Bank of Pakistan. Research Department.10.20547/jfer1904203Suche in Google Scholar

Received: 2021-02-09
Accepted: 2021-09-16
Published Online: 2021-10-12
Published in Print: 2021-12-20

© 2021 Walter de Gruyter GmbH, Berlin/Boston

Heruntergeladen am 8.11.2025 von https://www.degruyterbrill.com/document/doi/10.1515/spp-2021-0004/html
Button zum nach oben scrollen