In this research paper examines the impact of the developments in the financial sector on economic growth in India in the post-reform period. The interdependence between credit expansion and economic growth has been a subject of some debate. While some economists contest that the development of the financial system is a byproduct of economic growth others assert that credit expansion is critical for growth itself. India�s impetus on expanding its banking reach and recent changes in the way transactions are being done begs the question whether such changes directly affect the growth trajectory. This paper aims to examine and understand the relationship between credit and growth in India in the last few decades. Different metrics for credit and output is used to test the relationship at an overall as well as sectoral level. An increase in the market capitalization dampens economic growth, whereas turnover has no significant effect, and an increase in the money market rate of interest has a positive effect on economic growth. Real wealth, debt burden, real effective exchange rate and the rate of growth of labour have negative effects. Vector error correction method shows that the ECM term relating to market capitalization and inflation help adjust short-run dynamics of economic growth when we use market capitalization as the indicator of the stock market development. The findings lend no support to the theoretical prediction that the stock market development would play an important role in enhancing economic growth in India. On the contrary, reform measures on the market rate of interest that were introduced in the Indian banking system appear to have promoted economic growth significantly. Key words: Bank credit, Granger Causality, Johansen Test, Credit and Economic Growth.