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Financial sector development and economic growth in Indian states

Author

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  • N.R. Bhanumurthy
  • Prakash Singh

Abstract

The present study tries to understand the trends and determinants of economic growth in the Indian states in the post-reform period. For this, it considers the role of financial sector development since this sector has seen substantial reform measures. With the help of panel time series models, the study concludes that there is a long run relationship between financial variables and the growth. The results also show, although it is necessary to have development in terms of increase in number of bank branches, it is the extent of bank business which is more important in the growth process at the state level. In other words, financial sector reform that improves financial intermediation could have substantial growth impact in state output and expansion of bank branches could just be a necessary but not a sufficient condition when we look from the macroeconomic growth perspective. Further, as empirical results show that there is a bidirectional causation between growth and finance, policy measures are needed to enhance access that ensures positive and stable relationship between these two.

Suggested Citation

  • N.R. Bhanumurthy & Prakash Singh, 2013. "Financial sector development and economic growth in Indian states," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 6(1), pages 47-63.
    • Handle: RePEc:ids:ijepee:v:6:y:2013:i:1:p:47-63
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    Citations

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    Cited by:

    1. Mosab I. Tabash & Eissa A. Al-Homaidi & Anwar Ahmad & Najib H.S. Farhan, 2020. "Factors affecting financial performance of Indian firms: an empirical investigation of firms listed on Bombay Stock Exchange," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 13(2), pages 152-172.
    2. Biswajit Mohanty & N. R. Bhanumurthy, 2018. "Regional growth policy experience in India: the spatial dimension," Asia-Pacific Journal of Regional Science, Springer, vol. 2(2), pages 479-505, August.
    3. Irina A. Morozova & Elena G. Popkova & Tatiana N. Litvinova, 2019. "Sustainable development of global entrepreneurship: infrastructure and perspectives," International Entrepreneurship and Management Journal, Springer, vol. 15(2), pages 589-597, June.
    4. Kais Mtar & Walid Belazreg, 2021. "Causal Nexus Between Innovation, Financial Development, and Economic Growth: the Case of OECD Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(1), pages 310-341, March.
    5. Thanh Le & Ngoc Vu Bich & Sau Mai & Ha Nguyen & Hung Bui, 2023. "Financial Development and International R&D Spillovers Through Trade: Evidence From Developing Countries," SAGE Open, , vol. 13(1), pages 21582440231, March.
    6. Natalia G. Vovchenko & Olga B. Ivanova & Elena D. Kostoglodova & Marina O. Otrishko & Olga S. Dzhu, 2016. "Innovations and Fighting Global Economic Problems," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 10(4), December.
    7. Svetlana G. Vokina & Yulia S. Zima & Nikolai G. Sinyavsky & Vadim Meshkov & Aleksandra V. Sultanova, 2016. "Unification of Economic Systems in the Global Economy: Barriers and Preconditions," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 10(4), December.

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