Corporate Financing Pattern in India: Changing Composition and Its Implications

This paper examines the financing pattern of private corporate sector in India. Several studies in the last three decades have increasingly emphasized the role of finance in influencing investment activities of firms. In India, the state had actively fostered the development of financial system till the 1980s, though it favored bank-based system. With the ushering in of financial sector reforms since the early 1990s, the emphasis on equity market has gone up. This paper finds that while corporate sector relied more on bank/institution sources of funding till the early 1990s, its reliance on equity market has gone up since then. The paper ends with a discussion on the implications of such changing financing pattern.