Development Finance in India

Abstract

Till recently India was an exemplary instance of the use of development banking as an instrument of late industrialisation. The turn to and emphasis on development banking in the immediate aftermath of Independence is explained by two features characterising the Indian economy at that point in time: one was the inadequate accumulation of own capital in the hand of indigenous industrialists; and the other was the absence of a market for long term finance (such as bond or active equity markets), which firms could access to part finance capital-intensive industrial investment.