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Financial Liberalization and Household Financial Behaviour in India

Gauthier Lanot () and Peter Lawrence

No KERP 2005/15, Keele Economics Research Papers from Centre for Economic Research, Keele University

Abstract: Changes in financial policy are expected to result in the greater availability of credit as financial controls are relaxed and banking competition is increased. This ‘financial deepening’ should show up in ahigher consumption expenditure in areas where credit is often required, such as durable consumption, education and health. We use the household consumption data collected by India’s National Sample Survey Organisation for 11 rounds which straddle the period before and during financial liberalization (i.e. 1987-2000).We generate measures of the within-households shifts in distribution of consumption and see how far these are correlated with financial development variables. We find that at the macro level, financial depth did not increase from the beginning to the end of the period under study. However we did find some association between some of the financial development variables and expenditure on durables goods, although the changes in behaviour are very small.

Keywords: Financial liberalization; financial depth; durables; household consumption; credit. (search for similar items in EconPapers)
JEL-codes: D12 O12 O16 O23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-dev and nep-fmk
Date: 2005-12
Note: This paper is an output of Research Project R7968 ‘The Effects of Macro-financial policy on household micro-financial behaviour’ funded by the Department for International Development (DFID) Social Science Research (formerly ESCOR). The views expressed here do not necessarily represent those of DFID. Thanks are due to Ibo Longjam, Peter Quartey and Tarja Viitanen for research assistance at various stages of the project. The views expressed here do not necessarily represent those of DFID.
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