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In Chapter 4, the author has tested his macro-findings by
selecting two industries namely, tea and cement. Production,
consumption, prices, exports, sickness and investment outlook
are the variables selected by the author for studying tea and
cement industries. Chapter 5, Bank Credit Across Industries, is
one of the core chapters of the book. In this chapter, the
actual bank credit flow across industries has been analysed.
Other issues related to monetary policy like autonomy of the
RBI, broad objectives of monetary policy, capital account
convertibility, role of bank credit in balanced regional
development are also studied in this chapter. Chapter 6,
Analysis of Statistical Data, is full of statistical
information. The chapter also includes a rigorous cause and
effect analysis of data by using powerful econometric techniques
like regression analysis. Concluding remarks and policy
recommendations have been made in Chapter 7.
The major findings
of the study are in conformity with earlier studies. For
example, the present study has found that bank credit is one of
the leading factors contributing to the enhancement of
industrial production. Professor S.K. Goyal, Director, The
Institute of Studies in Industrial Development, New Delhi, had
empirically documented this finding way back in early eighties.
The present study suggests that the situation has not changed as
far as the role of institutional finance in industrial
development is concerned. Interestingly, the flow of bank credit
from nationalised financial institutions to the industrial
sector has experienced a two-fold increase during the
post-liberalisation phase and this has eroded the myth that
liberalisation and globalisation would open better and cheaper
private sources of finance for the Indian industry.
Sudden and heavy
dose of liberalisation under the pressure of the World
Bank-International Monetary Fund combine, has put Indian
industry at a disadvantageous position in the international as
well as domestic markets. The author has clearly stated that
this has resulted in sickness in Indian industry. That the
institutional mechanism, in the form of Board of Industrial
Finance and Reconstruction (BIFR) aiming to deal with sickness,
has failed to deliver results, is another revealing finding of
the study.
India inherited
sharp regional disparities from the colonial rule. One of the
objectives of Indian economic policy, particularly planning, is
to reduce regional disparities. Along with other institutions of
economic governance, financial institutions have been assigned
the task of devising their credit policy with a view to
encouraging industries to go to backward areas. The author by
conducting district-wise analysis of bank credit has suggested
that the disbursal of bank credit across districts has not
succeeded in reducing regional disparities in economic
development.
The author has
found that liberalisation has granted the RBI a good leverage in
the administration and management of the entire financial
system.
The present work
is richer in content and better in presentation vis-a-vis
ordinary Ph.D theses as the author has supplemented his findings
by relying upon his over 35 years of experience of working with
the RBI. A succinct foreword by K.C. Pant, Deputy Chairman,
Planning Commission, is an added advantage.
While bringing out
a new edition of this book, it is suggested that the author
incorporate a review of literature, specify clearly the
rationale of variables included in regression analysis,
re-analyse his statistical findings and provide suitable
explanations in case findings are at variance with theory. In
the absence of a review of relevant literature readers cannot
compare this work with the works of other scholars.
Selection of
variables for regression analysis needs proper justification
failing which the econometric model is prone to include
superfluous variables. Some of the computation in the regression
analysis needs a re-look by the author. At places, the author
has stated that his findings are not in tune with existing
theory. A serious reader expects a plausible explanation from
the author about this dichotomy between empirical results and
prevailing theory.
The book on the
whole is a welcome addition to the existing body of knowledge in
the field of financial institutions and its interface with the
economy in general and industrial sector in particular. The book
will find sizeable readership among teachers, students, bankers,
industrialists, economic administrators and policy makers
interested in the field of financial institutions-industry
partnership.
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