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Financial Development and Growth in India; A Growing Tiger in a Cage?

  • Hiroko Oura
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    This paper examines the efficiency of the different segments of India's financial system using firm-level data on corporate financing patterns. Firms are increasingly relying on external funds to finance their investment in most recent years. Empirical analyses indicate that (1) the financial system in India is not channeling funds into industries with higher external finance dependence; (2) the debt financing system does not allocate funds according to firms' external finance dependence, while equity financing system does; and (3) firms in an industry that are more dependent on external finance grow more slowly.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/79.

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    Length: 30
    Date of creation: 01 Mar 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/79
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    1. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
    2. Franklin Allen & Douglas Gale, 1996. "Financial Markets, Intermediaries and Intertemporal Smoothing," Center for Financial Institutions Working Papers 96-33, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    4. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
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    6. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
    7. Dani Rodrik & Arvind Subramanian, 2004. "Why India Can Grow At 7 Percent a Year or More: Projections and Reflections," IMF Working Papers 04/118, International Monetary Fund.
    8. Allen, Franklin & Chakrabarti, Rajesh & De, Sankar & Qian, Jun “QJ” & Qian, Meijun, 2012. "Financing firms in India," Journal of Financial Intermediation, Elsevier, vol. 21(3), pages 409-445.
    9. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
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    20. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
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