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Why is India's Financial Sector in Such Trouble: A Whodunnit?

Author

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  • Ajay Chhibber

    (George Washington University)

Abstract

India's financial system has never collapsed - unlike many other emerging economies. But it suffers from a deep and expanding silent crisis, which has made it one of the most inefficient and non-inclusive financial systems in the world. This paper unravels the reasons for this deep crisis - who is responsible - the regulators, populist politicians, crony capitalists and India's fiscal dominance. It shows that all the above are culpable. It lays out the major reforms needed and argues that if deep surgery is not performed India cannot emerge as a global economic powerhouse in the 21st century and will remain stuck in a low middle-income trap.

Suggested Citation

  • Ajay Chhibber, 2021. "Why is India's Financial Sector in Such Trouble: A Whodunnit?," Working Papers 2021-09, The George Washington University, Institute for International Economic Policy.
    • Handle: RePEc:gwi:wpaper:2021-09
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    File URL: http://www2.gwu.edu/~iiep/assets/docs/papers/2021WP/ChhibberIIEP2021-09.pdf
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    More about this item

    Keywords

    Financial Crisis; Public Sector Banks; Financial Inclusion; Banking Reform;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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