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

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  • Ms. 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.

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  • Ms. Hiroko Oura, 2008. "Financial Development and Growth in India: A Growing Tiger in a Cage?," IMF Working Papers 2008/079, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/079
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    2. C Niranjan Rao, 2008. "The Role of Intellectual Property Rights in Information and Communication Technologies," Working Papers id:1742, eSocialSciences.
    3. 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.
    4. Shastri, Shruti & Giri, A.K. & Mohapatra, Geetilaxmi, 2022. "Foreign capital inflows and poverty linkages in South Asia: Do the forms of capital inflows matter?," Economic Systems, Elsevier, vol. 46(3).
    5. Pramod Sinha & Seshanwita Das, 2021. "Pattern and Trends of Financing in the Indian Manufacturing Sector," Studies in Microeconomics, , vol. 9(1), pages 105-127, June.
    6. Jahangir Aziz, 2008. "Deconstructing China’s and India’s Growth: The Role of Financial Policies," Working Papers id:1714, eSocialSciences.
    7. 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.
    8. 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.
    9. Kiichi Tokuoka, 2012. "Does the Business Environment Affect Corporate Investment in India?," IMF Working Papers 2012/070, International Monetary Fund.
    10. Peter Lindner & Sung Eun Jung, 2014. "Corporate Vulnerabilities in India and Banks' Loan Performance," IMF Working Papers 2014/232, International Monetary Fund.
    11. 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.
    12. Golam Rabbani & S N Rajesh Raj, 2024. "The role of financial constraints in firm transition—Evidence from Indian manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(4), pages 2193-2228, May.
    13. Denila Jinny Arulraj & Thillai Rajan Annamalai, 0. "Firms’ Financing Choices and Firm Productivity: Evidence from an Emerging Economy," International Journal of Global Business and Competitiveness, Springer, vol. 0, pages 1-14.
    14. Sourafel Girma & Dev Vencappa, 2015. "Financing sources and firm level productivity growth: evidence from Indian manufacturing," Journal of Productivity Analysis, Springer, vol. 44(3), pages 283-292, December.
    15. Shah, Ajay & Patnaik, Ila, 2011. "Reforming the Indian financial system," Working Papers 11/80, National Institute of Public Finance and Policy.
    16. Shah, Ajay & Patnaik, Ila, 2011. "India's financial globalisation," Working Papers 11/79, National Institute of Public Finance and Policy.
    17. 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.
    18. Tronzano, Marco, 2011. "“Finance and Growth: A Reassessment of the Empirical Evidence for the Indian Economy” - Finanza e crescita: un riesame dell’evidenza empirica nel caso dell’India," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 64(3), pages 329-364.
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    21. Denila Jinny Arulraj & Thillai Rajan Annamalai, 2020. "Firms’ Financing Choices and Firm Productivity: Evidence from an Emerging Economy," International Journal of Global Business and Competitiveness, Springer, vol. 15(1), pages 35-48, June.
    22. Mr. Jahangir Aziz, 2008. "Real and Financial Sector Linkages in China and India," IMF Working Papers 2008/095, International Monetary Fund.

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    Keywords

    WP; firm; fund; firm growth;
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