ABSTRACT
This chapter discusses the effects of interest rate fixing on the efficiency of investment outlets, inflation, and the distribution of income. Financial intermediation is in a rudimentary state, imposing serious financial constraints on external investment in new technologies which yield high rates of return, while investment proceeds in the older, self-financed sectors which yield low rates of return. However, it may well be that financial development is a prerequisite, if not a major determinant, of the take-off into self-sustained economic growth. Technological advances even in today's more developed countries offer a more or less temporary advantage to those innovators who introduce them into the production process. Developing economies are fragmented economies where the co-existence of old and modern technologies with strikingly different degrees of efficiency in using scarce physical and human resources result in enormously wide disparities in the rates of return to different investments.
