The leading works hardly include finance as a factor for growth.
Since then there has been numerous research analyzing how financial systems help in developing economies.
It is indeed irrefutable that considerable part of the differences in long run economic growth across countries can be elucidated by disparity in their financial development (King and Levine, 1993a; Levine and Zervos, 1998, Demirguc-Kunt and Maksimovic (1998) and Rajan and Zingales, 1998).
Beck, Demirguc-Kunt, Laeven and Levine (2006) use Rajan and Zingales (1998) approach, which provides supplementary evidence that financial development increasingly props up the growth of smaller firms which constitute largely the priority sector lending in the case of Indian Financial sector.
Our understandings and analysis on the topic are presented here below in the following sections.
In Section-II, the importance of `Finance’ for economic growth has been established with adequate literature review.Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.Amartya Sen (2000) convincingly argued that poverty is not merely insufficient income, but rather the absence of wide range of capabilities, including security and ability to participate in economic and political systems.Banking sector can wield a positive influence on the overall economy, and hence is of broad macroeconomic importance (Bonin and Wachtel, 1999, Jaffe and Levonian, 2001, Rajan and Zingales, 1998).It is established that better developed banks and markets are closely associated with faster growth (Levine, Loazya and Beck, 2000; Loayza and Ranciere (2002); Christopoulos and Tsionas, 2004). Correspondingly, by aiding risk management, improving the liquidity of assets available to savers, and by lowering trading costs; banks can enliven investment in potential economic activities (Obstfeld 1994; Bencivenga and Smith 1991; Greenwood and Smith 1997).Other studies also establish a positive relationship between financial development and growth at the industry level, like the one by Rajan and Zingales (1998).Since the groundbreaking contributions of King and Levine (1993a, b), economists have shown renewed interest in the finance-growth nexus.However, regional interactions reveal that cultural factors are likely to influence the gender inequality–microfinance nexus.Third, it designs a new multidimensional financial exclusion index using survey-level microeconomic data from China.Fourth, the index is also used to show that financial inclusion has a positive effect on household income and helps to reduce income inequality.Disclaimer: This work has been submitted by a student.