Demand-Side and Supply-Side Determinants of Financial Inclusion in Indian States: Evidence from Post-Liberalization Period

Abstract

An initiative of financial inclusion helps to boost the economies of poorer regions and countries. Also, greater financial inclusion is a prime driver for attaining social inclusion in most of the developing nations across the globe. So, the main purpose of this article is to investigate the determinants of financial inclusion from both demand- and supply-side variables in Indian states during the post-liberalization periods (1993–2015). Furthermore, the study uses different econometric models such as fixed effect, random effect, panel-corrected standard errors, and feasible generalized least squares for analysis purpose. The empirical findings of this study suggest that among the demand-side factors, literacy and per capita state GDP have a positive impact on financial inclusion, whereas other two variables like rate of unemployment and percentage of rural population have a negative impact on financial inclusion. Likewise, from the supply-side factors, our empirical findings depict that all four variables (i.e., road length, electricity supply, social sector expenditure, and capital receipt) have a positive and significant effect on financial inclusion in the post-liberalized Indian states.