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Post-Independence India: A Case of Finance-Led Industrialization?

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  • Clive Bell

    (S�dasien Institut der Universitat Heidelberg; Heidelberg, Germany)

  • Peter L. Rousseau

    (Department of Economics, Vanderbilt University)

Abstract

This paper examines whether financial intermediaries have played a leading role in influencing India's economic performance. After describing the evolution and functions of the financial sector, we construct a set of vector autoregressive and vector error correction models to evaluate the strength and direction of the links between measures of formal intermediation and various economic aggregates. The results suggest that (i) the financial sector was instrumental not only in promoting aggregate investment and output, but also in the steady shift toward industry that has characterized India's development; (ii) the operative channel was one of debt accumulation rather than improvements in total factor productivity; and (iii) its contributions went beyond the passive support of fiscal policy.

Suggested Citation

  • Clive Bell & Peter L. Rousseau, 2000. "Post-Independence India: A Case of Finance-Led Industrialization?," Vanderbilt University Department of Economics Working Papers 0019, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0019
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    More about this item

    Keywords

    Finance; India; industrialization; VAR; VECM;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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