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Inventory, in most of the industries, accounts for the largest proportion of gross working capital. A number of studies, therefore, have been conducted to find the determinants of investment in inventories. The following discussion provides a brief review of studies, dealing with factors influencing investments in inventory in India. Economic studies to analyze the factors that influence inventory accumulation in India, are based on time series and pooling of cross section of time series data pertaining to manufacturers’ inventories. Krishnamurty’s study (1964) was aggregative and dealt with inventories in the private sector of the Indian economy as a whole for the period 1948-61. This study used sales to represent demand for the product and suggest the importance of accelerator. Short-term rate of interest had also been found to be significant. Sastry’s study (1996) was a cross-section analysis of total inventories of companies across several heterogenous industries for the period 1955-60 using balance sheet data of public limited companies in the private sector. The study brought out the importance of accelerator represented by change in sales. It also showed negative influence of fixed investment on inventory investment. Krishnamurty and Sastry’s study in 1970 was perhaps the most comprehensive study on manufacturers’ inventories. They used CMI data and the consolidated balance sheet data of public limited companies published by RBI, to analyze each of the major

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components i.e. raw material, goods-in-process and finished goods for 21 industries over the period 1946-62. It was a time series study but some inter-industry cross section analysis had also been done. Accelerator represented by change in sales, bank finance and short-term interest rate were found to be important determinants. Utilization of productive capacity and price anticipations had been found toe of some relevance. Another study...