Does Financial Inclusion Promote Human Development? Evidence from India

Abstract

The present study investigates the relationship between Financial Inclusion Index (FII) and Human Development Index (HDI) of Indian economy. The study developed FII for the Indian economy from 1991 to 2020 by using the dimensions of banking penetration, banking availability and usage of banking services. The well-known techniques of Analytical Hierarchy Process (AHP) and Technique of Preference by Similarity to Ideal Solution (TOPSIS) is used to develop FII. The ARDL bound test confirms the existence of a long-run relationship between financial inclusion and human development. Granger non-causality confirms the existence of bidirectional causality between financial inclusion and human development. As financial inclusion acts as a key for human development, government should adopt policies to speed up the financial inclusion process in India.