Abstract
This paper examines the quality of livestock investments made by participants in India's Integrated Rural Development Programme in two villages in Southern India. Comparing the returns to livestock investment for IRDP participants against those for a control group of livestock purchasers who were not participants, it finds evidence of substantial price discrimination in the market for livestock. Participants in the scheme receive subsidised loans but purchase milch animals at inflated prices that are not compensated by higher livestock quality. Such imperfections in the markets for livestock assets may have serious adverse consequences for the efficacy of intervention to elleviate the credit market imperfections that are rightly believed to hamper the accumulation of capital by the poor.
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