Credit and Growth Cycles in India: An Empirical Assessment of the Lead and Lag Behaviour

This paper studies the leadlag pattern in the interaction between credit and growth cycles of India at three levels i.e. at the aggregate level for annual GDP growth, at the sectoral level across agriculture, industry and services, and also across major industries. The study focuses on three distinct periods, viz., 1950-51 to 1979-80, 1980-81 to 1990-91 and the post-1991 period and finds that there has been a significant transformation in the direction of credit-output causality during the period of analysis - from output being predominantly driven by credit in the pre-1980s period to nearly no relationship between the two during the 1980s and further to credit being primarily driven by output in the post-reforms period. [RBI W P S (DEPR) : 22 / 2011]. URL:[http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/22WPN020112.pdf].