ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Tara Shankar ShawSubscribe to Tara Shankar Shaw

Household Consumption Expenditure Inequality in Rural India (1993–94 to 2011–12)

The comparative role of determinants of household-level consumption expenditure inequalities (henceforth, inequalities) in rural India between two sub-periods, 1994–2005 and 2005–12 are examined, using three rounds of the National Sample Survey Consumer Expenditure Survey. The changes in the components of consumption expenditure and population characteristics are explored that explain inequalities during the two sub-periods, which represent distinct policy environments. We use both a priori and regression-based decomposition methods for the analysis. We find that there is a complete reversal of the role of education in explaining inequalities. It shifted from being an inequality-increasing factor during 1994–2005 to an inequality-equalising factor during 2005–12. This reversal is induced by decreasing consumption returns to education due to the depressed job market. The role of locational factors has increased in explaining the increase in inequalities over time. The non-food components induce an increase in the overall inequalities via an increased expenditure on durables. The within-group component contributes the most to the level of and change in inequalities.

Impact of Leverage on Firms’ Investment

It has been observed that the economic growth cycle coincides with the investment cycle in India. It is found that firm-level leverage could provide early signals about the movements in the investment cycle. Furthermore, a firm’s leverage adversely affects its investment activity after a threshold. Regression results, after controlling for firm’s price to book ratio and operational variables, indicate that the adverse impact of high leverage is predominant on low-growth firms. The initiatives to clean up the balance sheets of banks and deleveraging by non-financial corporates should help in the revival of the investment cycle. The results are consistent with the agency cost of debt and trade-off theory of capital structure, wherein firms set targets for leverage by balancing costs and benefits of debt.
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