In this paper, we first provide a descriptive evaluation of the supply side credit policy for small enterprises in India. Then we present an econometric analysis of a large scale data on small manufacturing enterprises in an attempt to examine the demand side factors associated with credit availability. The major contributions of this paper are as follows.

First, this is the only study that analyses credit availability for India’s small enterprises in the post-liberalization era. So far many studies discuss access to institutional credit for agriculture and rural households in India that also enjoy similar credit policy, while no study discusses access to institutional credit for SSIs that could be a key sector for extracting India from a ‘jobless growth’ situation. .

Second, our empirical analysis presents some nuances of the Indian context, while it also strengthens the existing literature on credit constraints. In line with the existing literature, we find that more transparent and more organised enterprises have higher likelihood of access to institutional credit. However, contrary to the existing literature, small enterprises having diversified activities and having contractual relationship with large enterprises are not associated with the likelihood of receiving institutional credit. While the literature identifies diversification of business activities and relationship with large enterprises are associated with less volatile production schedule and more creditworthiness, in case of India’s small enterprises, this may be rather driven by distress and these factors do not indicate less volatility and creditworthiness.