IIF in News: Press Release

While delivering Professor K.S. Mathur Memorial Lecture on Financial Developments in the World Economy at University of Rajasthan, Jaipur, Prof. J.D. Agarwal, Chairman & Director, Indian Institute of Finance, Delhi said Financial development has played a critical role in promoting industrialization by facilitating the mobilization of capital for large investments.
According to Prof. Agarwal, financial development contributes significantly to growth. It is central to poverty reduction. Some of the researches have shown that financial development directly benefits the poorer segments of society and also income redistribution.

For strong financial system, one requires supporting financial institutions and well developed financial markets to reduce the information costs of borrowing and lending and making financial transactions. According to him, stock markets are gaining importance particularly with international capital flows through the entry of foreign investment institutions in the stock markets.

However, in the current era of liberalization and globalization of financial markets, the economies of developing countries have become highly vulnerable to speculative capital movements in and out of the country opines Dr. Agarwal.

While referring to the financial crisis in East Asian countries and subsequent crises in Brazil, Russia, Turkey, and Argentina, Prof. Agarwal said such financial crises have highlighted the long-standing need for the reform of international financial reengineering to prevent the re-occurrence of the crisis. Given the increasingly interdependent nature of the world economy, the fortunes of all the countries are highly inter-linked says Prof. Agarwal.

Prof. Agarwal feels that we generally awake after the crisis has occurred and suggest measures to seek solutions to cure such financial crisis. However he stresses that signals for the possible financial crisis are generally depicted through the financial statistics and overall economic outlook of the economy. Effective and timely steps are required to be taken to deal with issues of financial crisis prevention. Prof. Agarwal also highlighted the importance of the prudent regulation of the domestic financial and banking sectors.