Financial development and poverty reduction in India: an empirical investigation

Madhu Sehrawat and Arun Giri

International Journal of Social Economics, 2016, vol. 43, issue 2, 106-122

Abstract: Purpose - – The purpose of this paper is to examine the relationship between financial sector development and poverty reduction in India using annual data from 1970 to 2012. The paper attempts to answer the critical question: does financial sector development lead to poverty reduction? Design/methodology/approach - – Stationarity properties of the series are checked by using Ng-Perron unit root test. The paper uses the Auto Regressive Distributed Lag (ARDL) bound testing approach to co-integration to examine the existence of long-run relationship; error-correction mechanism for the short-run dynamics and Granger non-causality test to test the direction of causality. Findings - – The co-integration test confirms a long-run relationship between financial development and poverty reduction for India. The ARDL test results suggest that financial development and economic growth reduces poverty in both long run and short run. The causality test confirms that there is a positive and unidirectional causality running from financial development to poverty reduction. Research limitations/implications - – This study implies that poverty in India can be reduced by financial inclusion and financial accessibility to the poor. For a fast growing economy with respect to financial sector development this may have far-reaching implication toward inclusive growth. Originality/value - – This paper is the first of its kind to empirically examine the causal relationship between financial sector development and poverty reduction in India using modern econometric techniques.

Keywords: India; Financial development; Auto regressive distributed lag (ARDL); Poverty reduction (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijsepp:v:43:y:2016:i:2:p:106-122

DOI: 10.1108/IJSE-01-2014-0019

Access Statistics for this article

International Journal of Social Economics is currently edited by Professor Terence Garrett

More articles in International Journal of Social Economics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().