Distinctive Pay-off of Packing Credit and Alternate Bank Credits for Large and Small Exporters of India: A Non-linear Approach

Abstract

Considering uneven access to bank finances, our study empirically examines the asymmetrical contribution of the large and small exporters to India’s export growth. Employing the panel threshold model of Hansen (1999), our study examines the relative role of packing credit (PC), short-term bank loans (BLs) and other alternate bank finances on export growth considering the period from 2002–2003 to 2018–2019. We conclude that though all the bank finances, the relative importance of the PC is more conducive than the others in terms of India’s export growth. Interestingly, our non-linear estimation shows that not only the small exporters are more sensitive to the usage of PC, but are more dependent on other alternate bank credits. On the contrary, the large exporters significantly rely only on the usage of subsidized PC and do not depend on other alternate bank credits. We conclude with a skewed preference for lending practices of the banking sector the benefits from such an export promotion scheme might remain unachieved on a broader scale.