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e, however, marked by the beginning of a process of gradual liberalization of the financial system. Ceilings on lending rates began to be lifted in 1988 and were completely abolished in 1989. Finally, further relaxations on directed credit and concessionary lending rates took place in 1990 and 1992.

Interestingly, the index appears to reflect quite well many of the policy shifts that occurred during the sample period. According to this index, the early 1960s appear to be characterized with gradual increases in the level of financial repression. There was some stability in the mid-1960s followed by a big jump in 1969. This behaviour coincides with developments in the 1960s which culminated with the nationalization of the largest eleven banks in 1969, which allowed the Reserve Bank of India to intensify its directed credit program and to impose controls on deposit rates. The 1970s were characterized with the gradual imposition of more controls, i .e. a lending rate floor operated during 1973 and 1974, a lending rate ceiling was imposed in 1975 and remained in operation for 13 years, and reserve requirements (PAPER 3) were raised in 1976. The early 1980s saw even more controls imposed and an intensification of the directed credit program. Once again the gradual increase in the index follows these developments quite well. The index drops significantly in 1985, which coincides with a partial deregulation of deposit rate controls. It then rises again, reflecting the reintroduction of deposit rate controls in 1988 and a 4% increase of reserve requirements in 1989, but drops again in 1990 when the directed credit program is relaxed. Finally, there is a small drop of the index in 1991, which coincides with further deregulations of deposit rates. (PAPER 3)

RECOMMENDATION (financial liberalisation)
Since the break-up of the colonial empires, many developing countries suffered from stagnant economic growth, high and persistent inflation, and external imbalances under a financially repressed regime. To cope with these difficulties economic experts had advocated what they called “Financial liberalization' mainly a high interest rate policy to accelerate capital accumulation, hence growth with lower rates of inflation (McKinnon (1973), Shaw (1973), Kapur (1976) and Matheison (1980)). Their argument that relaxation of the institutionally determined interest rate ceilings on bank deposit rates would lead to price stabilization and long-run growth through capital accumulation is based on the following chronology of events: (a) the higher deposit rates would cause the households to substitute away from unproductive assets (foreign currency, cash, land, commodity stocks, an so on) in favour of bank deposits; (b) this in turn would raise the availability of deposits into the banking system, and would enhance the supply of bank credit to finance firms' capital requirements, and ; (c) this upsurge in investment would cause a strong supply side effect leading to higher output and lower inflation.(paper 1)

CONCLUSION
The main finding of this paper is that the direct effects of financial repression in India were negative and quite substantial. We would, however, advise caution in generalizing from these results to other countries. It is well known that the success of economic policies largely depends on the effectiveness of the institutions that implement them, and this clearly varies from country to cou