Information communication technology diffusion and financial inclusion: an inter-state analysis for India

The paper investigates the impact of ICT (information communication technology) diffusion on the financial inclusion across 16 Indian states during the time period 2007–2008 to 2014–2015. Tele-density, usage of mobile phones and internet connectivity can improve the accessibility, reduce the transaction cost and travel cost of the commercial banking sector. This increases the access of institutional credit, products and services to marginalized unbanked population of society. Inter-state comparison reveals the fact that there are disparities in the spread of ICTdiffusion and financial inclusion across the regions and these disparities are persistent in nature. ICT diffusion index is consistently high in Punjab, Tamil Nadu, Kerala and Karnataka, whereas low in Assam, Bihar Uttar Pradesh, Orissa and Madhya Pradesh. Dynamic panel data analysis exhibits that ICT index has a strong positive significant impact on financial inclusion index. It also illustrates that lack of education, age composition of population, rural-urban location, poor status of financial literacy play a very vital role in spreading financial inclusion. The elderly people in rural as well as in urban areas are still not that familiar with mobile and internet, they may not be able to get benefited by ICT revolution.