Vol. 2, Issue 3 (2017)
Human capital and financial inclusion: An empirical study across districts of India
Author(s): Dr. Jatinder Kaur
Abstract: Human capital and Financial Inclusion are the two important pillars of inclusive growth and play a crucial role in reducing poverty and socio-economic inequalities in the society. India has also recognized financial inclusion as an important parameter to promote inclusive growth. This paper attempted to study the relationship between FII and Human Capital represented by Literacy Rate and Work- Participation Rate (Employment) amongst the 632 districts of India. The study used Financial Inclusion Index (FII) developed by the author (2017). Of the two indicators representing human capital, Literacy rate has been found to be important variable explaining variations in FII. As the study found that most of the financially excluded districts are dominated by primary sector (agriculture based) so analysis was also carried out replacing Work Participation Rate by Cultivators’ Participation Rate. Interestingly, it turned out to be an important indicator along with literacy rate. However, its negative association with FII revealed the presence of low productivity and lower per capita earnings in agriculture sector. The study concluded that India can improve the level of financial inclusion by investing in education and providing skill and training to its work –force to improve its productivity and income level. This is also needed to shift some work- force to other high productive sectors of the economy i.e. secondary and service sector. It is only by investing in education and the skill of its work-force; India can reap the advantage of Demographic Dividend and curtail variations and inequalities.