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Financial Development and Economic Growth

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  • C. Rangarajan

Abstract

The paper highlights the role of the financial sector in achieving sustained economic growth. It argues that an efficient financial system is very much essential for improving the saving and investment activity and for promoting the overall productivity in the economy. In this context. the paper reviews various efficiency parameters for evaluating the performance of the financial system and the causal link between financial development and economic growth. In India financial sector reforms introduced since 1992-93 have been aimed at removing the various external and internal constraints which affected the efficiency of the financial system. While discussing the rationale and relevance of financial sector reforms the paper specifically discusses the nature and extent of government intervention. interest rate deregulation. prudential norms and directed credit. The paper concludes that various reform measures in India have laid the foundation for an efficient and well functioning banking system which will support and strengthen a high level of real growth in future.

Suggested Citation

  • C. Rangarajan, 1998. "Financial Development and Economic Growth," Journal of Social and Economic Development, Institute for Social and Economic Change, Bangalore, vol. 1(1), pages 10-23, January-J.
    • Handle: RePEc:sch:journl:v:1:y:1998:i:1:p:10-23
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    File URL: http://www.isec.ac.in/JSED_v1_i1_10-23.pdf
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    Cited by:

    1. Jaime Andrés Sarmiento Espinel** & Laura Andrea Cristancho Giraldo, 2009. "Evolución del sistema financiero colombiano durante el período 1980-2007," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, June.
    2. Eduardo Walker & Fernando Lefort, 2002. "Pension Reform And Capital Markets: Are There Any (Hard) Links?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 5(2), pages 77-149.
    3. Anusorn Tamajai, . "The Impact of Capital Inflows of Asian Economic Growth," Fordham Economics Dissertations, Fordham University, Department of Economics, number 2000.4.
    4. Yuanchen Chang & Mao-Wei Hung & Chiuling Lu, 2005. "Trade, R&D spending and financial development," Applied Financial Economics, Taylor & Francis Journals, vol. 15(11), pages 809-819.
    5. Menzie D. Chinn, 2002. "The Compatability of Capital COntrols and Financial Development: A Selective Survey and Empirical Evidence," Asia Pacific Economic Papers 327, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.

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