Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Financial Development and Industrial Growth in India:An Empirical Investigation


Affiliations
1 University Business School, Panjab University, Chandigarh, India
2 Department of Economics, Panjab University, Chandigarh, India
     

   Subscribe/Renew Journal


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.

Keywords

Financial Development, Industrial Growth, Economic Reforms.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Aghion, P., Burgess, R., Redding, S., & Zilibotti, F. (2005). Entry liberalization and inequality in industrial performance. Journal of the European Economic Association, 2(3), 291-302.

  • Aziz, J., & Duenwald, C. (2002). Growth-financial intermediation nexus in China (No. 2002-2194). International Monetary Fund.

  • Calderon, C., & Liu, L. (2003). The direction of causality between financial development and economic growth. Journal of Development Economics, 72(1), 321-334.

  • Chandrasekhar, P. C. (1988). Aspects of growth and structural change in Indian industry. Economic and Political Weekly, 23(45-46-47).

  • Chang, T. (2002). Financial development and economic growth in Mainland China: A note on testing demand-following or supply-leading hypothesis. Applied Economics Letters, 9(13), 869-873.

  • Deidda, L., & Fattouh, B. (2002). Non-linearity between finance and growth. Economics Letters, 74(3), 339-345.

  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of estimators for autoregressive time series with a unit ischolar_main. Journal of the American Statistical Association, 74(366a), 427-431.

  • Gopinath, S. (2007). Special features of financial sector reforms in India. Inaugural Address delivered at the 18th Annual National Conference of Forex Association of India on April 6, 2007 at Bangkok.

  • Kletzer, K., & Bardhan, P. (1987). Credit markets and patterns of international trade. Journal of Development Economics, 27(1), 57-70.

  • Lan, Y. W., Lin, D., & Lin, L. (2015). Financial liberalization, economic growth and investment strategy: Lessons from Taiwan for new industrial Countries. Journal of Business Theory and Practice, 3(2), 188.4.

  • Neusser, K., & Kugler, M. (1998). Manufacturing growth and financial development: Evidence from OECD countries. Review of Economics and Statistics, 80(4), 638-646.

  • Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modeling approach to co integration analysis. In S. Strom (ed.), Econometrics and economic theory in the 20th century: The Ragnar Frisch Centennial Symposium (Chapter 11). Cambridge University Press: Cambridge.

  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.

  • Qayyum, A. (2006). Money, inflation, and growth in Pakistan. The Pakistan Development Review, 203-212.

  • Rajan, R. G., & Zingales, L. (1998). Which capitalism? Lessons from the east Asian crisis. Journal of Applied Corporate Finance, 11(3), 40-48.


Abstract Views: 276

PDF Views: 0




  • Financial Development and Industrial Growth in India:An Empirical Investigation

Abstract Views: 276  |  PDF Views: 0

Authors

Tilak Raj
University Business School, Panjab University, Chandigarh, India
Vikas
Department of Economics, Panjab University, Chandigarh, India

Abstract


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.

Keywords


Financial Development, Industrial Growth, Economic Reforms.

References