Financial Development and Economic Growth of India

Abstract

The relationship between financial development and economic growth in India is long debated. Economy is either bank centric or market centric. Indian Economy is more towards Bank based Economic System, where Banks plays vital role in the economy. Better functioning of banks and markets helps country to grow faster no matter the degree with which country is bank based or market based. The newlinedirection of causality is also and another issue highly debatable. The growth of Economy may generate higher employment, better industry performance and results into financial development. In other way, more financial development may create better business opportunity, more government spending, better trade which leads to growth of economy. The effective functioning of the financial system will reduce the external financial constrains that hinders the firms and industrial expansions. This is one factor with which financial development matters for the growth. The systematic and scientific approach is used to study the relationship between financial development and economic growth. Based on the prior studies and literature, the present study critically assesses the empirically literature on financial development and economic growth. newline newline