Technical efficiency of financial inclusion and human development: Insights from the Indian states

Bhanu Pratap Singh and Anup Yadava

Economic Notes, 2022, vol. 51, issue 2

Abstract: Financial inclusion programs are used as a major economic development tool in emerging economies. Human development is the major determinant of financial inclusion, creating opportunities for people to better access financial services. The study's major aim is to examine the technical efficiency of financial inclusion of Indian states by Data Envelopment Analysis using human development as input. To achieve this objective, a 3‐dimensional Financial Inclusion Index (FII) is constructed for 28 major Indian states from 2010 to 2017. Empirical findings suggest most Indian states are under low and medium financial inclusion, and states with better human development have better FII status. Crucially, technical efficiency results reveal states with better human development perform better in terms of FII. The inconsistency in FII and human development ranks is majorly found in North‐eastern and high‐income Indian states. Therefore, policymakers in India should focus on promoting human development in low Human Development Index states.

Date: 2022
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