Unraveling the Synergy: Exploring the Link Between Financial Inclusion and Human Development in Indian States

Abstract

It is commonly acknowledged that financial inclusion plays a critical role in promoting human development and fair progress. This study examines the connection between human development and financial inclusion in several Indian states. It looks at how monetary policy affects financial inclusion as well. Using secondary data from government, World Bank, and RBI sources during the last ten years, the increased financial inclusion effort is examined.

Whilst the human development index takes into account factors like income, health, and education, the financial inclusion index takes into account factors like banking penetration, service availability, and payment and remittance usage. With an 82.9% explanatory power, correlation analysis reveals a high positive correlation between financial inclusion levels and human development indicators across states. Even after adjusting for the total amount of predictors, the finding is still strong. This suggests that states that attain higher levels of financial inclusion also see higher levels of human development advancement. Furthermore, with 99.6% confidence, the Chi-square statistic statistically rejected the null hypothesis that there is no link. Demonstrating the need for integrated policy approaches and utilizing their synergistic relationship to promote sustainable and all-encompassing development.

Empirical evidence from academic worldwide evaluations of interest rates, loan availability, and exchange rate flexibility is used to evaluate the impact of monetary policy. It shows that substantially stricter regimes have a negative impact on the results of financial inclusion.

Implying that financial access can be increased by leveraging accommodating monetary policy positions without compromising other goals. In general, the research offers policymakers suggestive data to support development planning and create interventions that acknowledge the connections between financial service accessibility and usage and human development metrics like poverty reduction.