Financial Development and Industrial Growth in India:An Empirical Investigation

The purpose of this paper is to examine the causal relationship between industrial growth and financial development during the post economic reforms in India (1991-2014). The long run relationship between financial development and industrial growth is tested by using ARDL (Auto Regressive Distributed Lag) model while causal relationship has been investigated with the help of Granger Causality Test. The empirical results of ARDL model found strong evidence in the long run between financial development and industrial growth and Granger Causality test indicate the bi-directional causality exists between industrial growth and financial development in India. The results of the present study support the significant role of financial development in the industrial growth. Easy licensing policy, credit availability, tax structure, skill centres and digitalization of market structure can enhanced the industrial growth in India.