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The Indian Economy Since 1991, 2nd Edition by B. A. Prakash

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8

Financial Liberalization and Corporate Financing in India

V. R. Prabhakaran Nair

8.1 Introduction

In the new milieu of financial reforms in India, the market forces increasingly govern the allocation of funds and this has implications for the availability, cost and quantum of funds, which ceteris paribus will enable the corporate sector to make an optimum combination of the sources of funds for industrial investment. It was presumed that financial liberalization may change the parameters of investment functions because of the relaxation of credit constraints and the influence of reduced borrowing costs on investment decisions. The neo-liberal approach argued for a liberal financial system where the inter-play of market forces rather than government ...

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