Does Financial Inclusion Reduce Poverty and Unemployment? Some Evidences from Indian States

This paper makes an attempt to empirically examine whether financial inclusion has contributed to poverty reduction and decrease in unemployment in Indian states. Using a balanced panel data set for 29 states and Union Territories between 2009- 10 and 2013-14, models explaining poverty and unemployment are constructed where the independent variables of interest are financial inclusion indices. The other explanatory variables are treated as control variables including the credit- deposit ratio and literacy rate. From the estimated System Generalised Method of Moments models, financial inclusion is found to reduce poverty in rural areas, urban areas and the overall- state economy. Besides, the paper finds that financial inclusion reduces unemployment significantly in the rural areas and the economy as a whole, while its effect in urban areas is minimal.