Identifying growth triggers

Financial flows respond to large infrastructure investments and help spur real economic outcomes

There is a widespread perception that finance and India’s “twin balance sheet” problem have constrained India’s economic growth. A key reason why so many developing countries have failed to accelerate growth is the lack of financial development required to cope with twin balance sheet problems and misallocation of resources. So, increased fiscal policy emphasis on dealing with the twin balance sheet problem and recapitalisation of banks is often encouraged. But India also has other issues to deal with, including scaling up its physical infrastructure. While an improved financial sector is important for India’s growth, can the country still accelerate growth