Bank Credit and Economic Development: An Empirical Analysis of Indian States

Abstract

The introduction of economic reforms in India, particularly reforms in the banking sector, although boosted and edged up the profits and improved efficiency of the banks, an unwarranted consequence was the decline in credit to the less developed states and regions. The emphasis on efficient allocation of resources overlooked the developmental needs of these regions and states. This study examines the role of banks in the different states of India in the post-reform period and explores multi-dimensional role of credit in terms of, what it calls, the G-GUIDE indicators. Bank credit in the present study is examined in terms of growth, globalization, urbanization, inequality, reduction in poverty (development) and the empowerment of women.