Credit Constraint Impacts on Farm Households : Survey Results from India and China

India and China have the largest farm-household populations in the world and in many areas also the poorest. Among the many factors that affect farm livelihoods access to credit has been identified as a significant barrier. While there has been a significant literature on credit constraints in developing countries there is surprisingly little information as to the actual impacts of credit constraints on household well-being. The objective of this paper is to investigate the impact of credit constraints on various livelihood choices such as, physical and human capital formation, agricultural inputs application, consumption smoothing, and wage seeking behavior. This paper contributes to the literature and policy debates by comparing the effects between China and India using direct elicitation. The analytical results demonstrate that binding credit constraints adversely affect a broad range of production and livelihood choices. We empirically show that credit constraints negatively affect food consumption, farm inputs applications, and health and educational attainments