Economic growth and the development of banking and insurance sector in the post-liberalized India

Shrutikeerti Kaushal and Amlan Ghosh

International Journal of Social Economics, 2017, vol. 44, issue 12, 2187-2207

Abstract: Purpose - The importance of banking and insurance, as an important part of the financial system, has been well accepted in the growth literature. Acting as financial intermediaries they perform important functions that may contribute in economic growth. Addressing this issue, the purpose of this paper is to empirically examine the relationship between banking, insurance and economic growth in India in the post-liberalized era when the private sector was allowed to operate banking and insurance business. Design/methodology/approach - In order to find the long-run and short-run relationship between banking, insurance and economic growth, the study uses the VAR-vector error correction model (VECM) along with Granger causality test to explore any causal relationship. Findings - The results indicate that there is the long-term relationship between banking, insurance and economic growth and the causality results show a bi-directional relationship between insurance activity and economic growth; however, banking is not granger cause of insurance or economic growth rather it is economic growth that cause banking development. Research limitations/implications - The only limitation to the study is the non-availability of monthly figures of GDP. The study therefore, as suggested by RBI, uses monthly data set of Index of Industrial Production to measure economic growth. Practical implications - The findings of the study give policy directions to the policymakers to make strategies that are conducive toward boosting development in insurance in order to achieve the targeted economic growth. Originality/value - This work is the first attempt to study the conjoint relationship between banking, insurance and economic growth on the Indian economy after the reforms were initiated in the financial sector.

Keywords: Causality; Insurance; India; Banking; Co-integration; Economic growth (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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:ijse-04-2016-0121

DOI: 10.1108/IJSE-04-2016-0121

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 ().