Role and Importance of Bank in the Economic Development
1
Development Banks: Their role an d importance for development
C.P. Chandrasekhar
Among the institutions whose role in the develo pment of the less developed regions is well recognised but inadequately emphasised are the development banks. Playing multiple roles, these institutions have helped promote, nurtu re, support and monitor a range of activities, though their most important function has been as drivers of industrial development.
All underdeveloped countries launching on national development strategies, often in the aftermath of decolonisation, were keen on accel erating the pace of growth of productivity and per capita GDP. This was the obvious require ment for alleviating poverty and reducing the developmental gap that separated them from the developed countries. To realise this goal, they considered industrialisation to be an important prerequisite. This stemmed from the perspective that modern economic growth was a process characterised by an increase in the share of employment in the non-agricultural sector, and within the latter by a change in the scale of productive units, the growth of f actory production and a shift from personal enterprise to the impersonal organisation of economic firms.
Besides the apparent universality of this trajectory across countries, a range of arguments were advanced to justify the centrality afforded to modern factory industry. First was the conclusion derived from trends in consumption styles across the globe and embodied in rudimentary form in Engels' Law that the demand for non-food commodities in general and manufactures in particular grows and diversifie s as incomes increase. Growth must therefore be accompanied by a process of diversification of economic activity in favour of manufactures. Second was the belief that, gi ven the barriers to productivity increase characteristic of predominantly agrarian economi es, the diversification in favour of industrial production is an
Development Banks: Their role an d importance for development
C.P. Chandrasekhar
Among the institutions whose role in the develo pment of the less developed regions is well recognised but inadequately emphasised are the development banks. Playing multiple roles, these institutions have helped promote, nurtu re, support and monitor a range of activities, though their most important function has been as drivers of industrial development.
All underdeveloped countries launching on national development strategies, often in the aftermath of decolonisation, were keen on accel erating the pace of growth of productivity and per capita GDP. This was the obvious require ment for alleviating poverty and reducing the developmental gap that separated them from the developed countries. To realise this goal, they considered industrialisation to be an important prerequisite. This stemmed from the perspective that modern economic growth was a process characterised by an increase in the share of employment in the non-agricultural sector, and within the latter by a change in the scale of productive units, the growth of f actory production and a shift from personal enterprise to the impersonal organisation of economic firms.
Besides the apparent universality of this trajectory across countries, a range of arguments were advanced to justify the centrality afforded to modern factory industry. First was the conclusion derived from trends in consumption styles across the globe and embodied in rudimentary form in Engels' Law that the demand for non-food commodities in general and manufactures in particular grows and diversifie s as incomes increase. Growth must therefore be accompanied by a process of diversification of economic activity in favour of manufactures. Second was the belief that, gi ven the barriers to productivity increase characteristic of predominantly agrarian economi es, the diversification in favour of industrial production is an