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

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  • Hiroko Oura

Abstract

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.

Suggested Citation

  • Hiroko Oura, 2008. "Financial Development and Growth in India; A Growing Tiger in a Cage?," IMF Working Papers 08/79, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/79
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    Citations

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    Cited by:

    1. Takatoshi ITO & Akira KOJIMA & Colin McKENZIE & Shujiro URATA, 2009. "Editors' Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 1-18.
    2. Snowden, Nicholas & Muñoz, Jesús, 2012. "Building a BRIC? Stock Market Opening and Investment Finance in India since Liberalization," World Development, Elsevier, vol. 40(6), pages 1109-1121.
    3. Roseline Oluitan, 2012. "Financial Development and Economic Growth in Africa: Lessons and Prospects," Business and Economic Research, Macrothink Institute, vol. 2(2), pages 54-67, December.
    4. C Niranjan Rao, 2008. "The Role of Intellectual Property Rights in Information and Communication Technologies," Working Papers id:1742, eSocialSciences.
    5. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    6. 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.
    7. Jahangir Aziz, 2008. "Deconstructing China’s and India’s Growth: The Role of Financial Policies," Working Papers id:1714, eSocialSciences.
    8. Markus Taussig & Andrew Delios, 2015. "Unbundling the effects of institutions on firm resources: The contingent value of being local in emerging economy private equity," Strategic Management Journal, Wiley Blackwell, vol. 36(12), pages 1845-1865, December.
    9. Takatoshi ITO & Akira KOJIMA & Colin McKENZIE & Shujiro URATA, 2009. "Editors' Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 1-18.
    10. Jahangir Aziz, 2008. "Real and Financial Sector Linkages in China and India," IMF Working Papers 08/95, International Monetary Fund.
    11. Jahangir Aziz, 2008. "Deconstructing China’s and India’s Growth - The Role of Financial Policies," Macroeconomics Working Papers 22142, East Asian Bureau of Economic Research.

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    Keywords

    Corporate finance; Corporate sector; Debt management; Economic growth; India; Bond markets; Financial systems; Financial development; growth; external finance; financial system; financial sector; bond;

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