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Financial Inclusion and Human Development in Indian States: Evidence from the Post-Liberalisation Periods

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  • Rajesh Barik
  • Sanjaya Kumar Lenka
  • Jajati K. Parida

Abstract

This article examines the existing synergy between financial inclusion and human development in Indian states during the post-liberalisation periods (1993–2015). Using both principal component analysis and panel data regression models, first, the impact of financial inclusion on human development is measured. Second, the reverse causality from human development to financial inclusion is estimated to know whether human development should be a pre-condition for ensuring greater financial inclusiveness in Indian states. It is found that financial inclusion has a positive and statistically significant impact on human development, along with other control variables such as social sector expenditure, per capita state gross domestic product and capital receipt. However, the lack of urbanisation (measured by the percentage of rural population) has a negative and significant impact on the process of human development in Indian states. On the other hand, since human development has also a significant reverse causal connection with financial inclusion, it is argued that ensuring financial inclusion through urbanisation measures would not only improve the level of human development in Indian states, but it would also sustain the process of inclusive development in itself due to the existing feedback loop with the later.

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  • Rajesh Barik & Sanjaya Kumar Lenka & Jajati K. Parida, 2022. "Financial Inclusion and Human Development in Indian States: Evidence from the Post-Liberalisation Periods," Indian Journal of Human Development, , vol. 16(3), pages 513-527, December.
    • Handle: RePEc:sae:inddev:v:16:y:2022:i:3:p:513-527
    DOI: 10.1177/09737030221141241
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    2. Kais Tissaoui & Abdelaziz Hakimi & Taha Zaghdoudi, 2024. "Can financial inclusion enhance human development? Evidence from low- and middle-income countries," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.

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