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Financial Inclusion and Its Impact on Economic Growth: Evidences from State-Level Data


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1 National Council of Applied Economic Research, New Delhi, India
     

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In this paper, an attempt has been made to assess the extent of financial inclusion in India and its relationship with economic growth. Between 1991 and 2015, penetration of bank branches doubled in all the states. The deposit-income ratio was observed to be less than one in all states except in Maharashtra, Karnataka, Delhi, Chandigarh and Goa, implying a low level of utilisation of banking services in major parts of the country. The regression analysis using state-level data indicated that penetration of bank branches was the most important variable influencing growth of gross state domestic product (GSDP). A percentage change in bank branches was observed to bring about 0.49% change in the real GSDP. The bank credit also significantly influenced growth of GSDP. A percentage change in credit would contribute 0.26% change in GSDP. Similarly, a percentage change in Automated Teller Machine (ATMs) penetration will contribute 0.25% to the real GSDP growth.

Keywords

Commercial, Bank, Financial, Inclusion, Banking, Outlet.
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  • Financial Inclusion and Its Impact on Economic Growth: Evidences from State-Level Data

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Authors

Tarujyoti Buragohain
National Council of Applied Economic Research, New Delhi, India

Abstract


In this paper, an attempt has been made to assess the extent of financial inclusion in India and its relationship with economic growth. Between 1991 and 2015, penetration of bank branches doubled in all the states. The deposit-income ratio was observed to be less than one in all states except in Maharashtra, Karnataka, Delhi, Chandigarh and Goa, implying a low level of utilisation of banking services in major parts of the country. The regression analysis using state-level data indicated that penetration of bank branches was the most important variable influencing growth of gross state domestic product (GSDP). A percentage change in bank branches was observed to bring about 0.49% change in the real GSDP. The bank credit also significantly influenced growth of GSDP. A percentage change in credit would contribute 0.26% change in GSDP. Similarly, a percentage change in Automated Teller Machine (ATMs) penetration will contribute 0.25% to the real GSDP growth.

Keywords


Commercial, Bank, Financial, Inclusion, Banking, Outlet.

References