The demands for funds by agricultural households: Evidence from rural India

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Abstract
This study presents estimates of borrowing functions based on rural household data from India. It improves upon existing work in three key areas. First, it is shown that existing studies have used an inappropriate definition of the demand for funds, which when rectified produces quite different results. Second, the interaction between agricultural technical change and the rural finance market is examined and it is shown that farmers in a position to benefit from technical change tend both to borrow more and to face lower interest rates. Third, it is shown that farm‐specific interest rates, when introduced endogenously, are quite sensitive to personal and locational characteristics and are significant determinants of borrowing.

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