Rural savings, investment, and interest rates in developing countries : evidence from India

by Farrukh Iqbal

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback40 pages $23.00 $18.40 20% Web Discount

This study estimates interest elasticities of rural savings and investment in a major developing country, India, and examines the apparent effects on those factors of policies of financial repression. Critics claim that such policies inhibit rural savings and investment. The results, however, do not support such criticism. Interest-rate variations are found to exercise a weak (positive) effect on savings but a strong (negative) effect on rural investment, which suggests that low-interest-rate policies have a small "cost" in terms of savings forgone and a large "benefit" in terms of investment achieved. A low-interest-rate policy may be preferred, therefore, in countries where the rate of rural investment is perceived to be considerably below some socially desirable level.

This report is part of the RAND Corporation Note series. The note was a product of the RAND Corporation from 1979 to 1993 that reported other outputs of sponsored research for general distribution.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.