Credit Accessibility Across Indian States: Evidence From Club Convergence

Abstract

Indian states are immensely heterogeneous in terms of their socioeconomic activities. The economic structure of India is consequently bifurcated too. This study examines, under given heterogeneities, whether credit accessibility among states converges over time, particularly in industrial and agricultural lending. We employ the concept of club convergence and find that substantial heterogeneities and multiple transition paths exist for industrial credit convergence across states, while agriculture credit is relatively less heterogeneous as compared with industry. Therefore, more attention is required to reduce access to banking credit for industries in poorer states.