Linkage between Financial Development and Income Inequality in India

Abstract

A sound financial system is a prerequisite for the inclusive and stable development of an economy, especially it plays a key role in dealing with the menace of inequality in income distribution. Economic policies including monetary and fiscal policy framed by the policymakers influence the accessibility to the financial resources by the poor. This study intends to examine the relationship between financial development and income inequality in India over the period 1973 to 2015. To analyze this relationship, the financial development index was constructed using the PCA approach. The study also checks the presence of the Greenwood–Jovanovich (GJ) hypothesis in the Indian economy. In this study, the ARDL Bound testing procedure is followed to assess the impact of financial development on income inequality. Besides financial development, the impact of economic development and government expenditure is also observed. Results confirm the existence of an inverted U-shaped linkage between financial development and income inequality in India, whereas economic development deteriorates the gap between the income of poor and rich. Furthermore, a U-shaped relationship between government expenditure and income inequality is revealed in this study. The findings of this study may provide new insight to the policymakers for framing suitable economic policies to encourage sustainable development in India.

Role of institution in combating crime in India: an empirical study

“…In this context, our result of C-D ratio can be compared with their observations. Our result is similar to the findings of Barua and Mahesh (2018). Fiscal instruments like own tax and non-tax revenue are inversely related to property crime.…”

“…The coefficient of SGDPPC is negative and 1% level of significant, while that of C-D ratio is positive at 1% significant level in all models. This result of C-D ratio supports the findings of Barua and Mahesh (2018). The estimated coefficient of non-tax is negatively significant at 1% level, however, that of own tax is negative and insignificant (except in M5).…”

“…This indicates that economic growth reduces property crime rates while financial development (C-D ratio) raises it. Barua and Mahesh (2018) also examined crime in India using financial variables including C-D ratio. In this context, our result of C-D ratio can be compared with their observations.…”

“…Barua and Mahesh (2018) considered credit, deposit, savings and total number of branches of bank as indicators of financial development. Results depicted that violent and non-violent crime increased with financial development and income inequality.…”

Roots of Appearance and Persistence of Income Inequality: A case study of India

“…In this paper, the authors criticize the transfer of opportunities and revenues from the rich to the poor in an efficient way to moderate-income inequality and criticize the Indian government as the main responsible for this measure. From the eyes of the writers without government intervention, income inequality is not avoidable, and it is the government that can and must create more job opportunities for the poor through economic (financial and monetary policies (Sharma & Dahiya, 2019).…”