Financial Inclusion and Economic Growth: Empirical Evidence from India

Authors

Dr. (Mrs.) Harish

Abstract

This paper examines empirically the role of “financial inclusion” on Indian economic growth, with an emphasis on "bank-based-financial deepening”. In contrast to previous research, I concentrate on the “causal relationship between the degree of ‘financial deepening’ and economic growth” in order to distinguish between numerous possible theoretical assumptions. To that purpose, Toda and Yamamoto (1995) used the modified Granger causality test technique in their work. Variables such as private sector credit, wide money, credit deposit ratio, and bank deposit liabilities are used to describe financial deepening. The findings largely support the concept that “bank-based financial deepening” is a significant determinant of economic growth, despite the fact that economic growth determines bank-based financial deepening. The causal linkages are primarily long-term in character. As a result, government policies targeted at boosting economic growth must be consistent and long-term in order to encourage India's financial depth.

Keywords

Financial Inclusion, Financial Deepening, Toda and Yamamoto Causality Test, Principal Component Analysis, Perron 97 Unit Root Test

Financial Inclusion and Economic Growth: Empirical Evidence from India. Dr. (Mrs.) Harish. 2016. IJIRCT, Volume 2, Issue 3. Pages 1-17. https://www.ijirct.org/viewPaper.php?paperId=2312015