Role of Financial Development and ICT in Promoting Inclusive Growth in South Asia: Moderating Effects of Governance

Abstract

The primary purpose of this study is to compute the index for inclusive growth by taking into account the indicators of poverty, income inequality, labor productivity, life expectancy, job creation, and climate. Calculating the index accomplished by the utilization of principal component analysis in order to acquire weights. Further in the study, the influence of financial development, governance, consumption, and economic growth on inclusive growth for selected south Asian economies (Pakistan, Bangladesh, India, Bhutan, Sri Lanka, and Nepal) is measured. The data is gathered from the World Development Index (WDI), the World Governance Index (WGI), the Internet Subscriber Database, and the International Monetary Fund Development Database. Due to the fact that the data spans from the year 2000 to the year 2023 and that missing values are interpolated through the use of trend projection, a fully balanced panel data sheet has been generated. Through descriptive statistic and VIF, prerequisite information is gathered to see the robustness of model. When it came time to make a decision on the unit root testing, the cross-sectional dependency test utilized to seek guidance. According to the findings, there is no evidence of cross-sectional dependency, and the first generation of unit root tests utilized. The stationarity results of mixed order of integration and T>N indicate the use of panel ARDL. Additionally, in order to see the influence that governance has on inclusive growth in connection to financial development, the moderator effect of governance also inquired. Based on the findings, it is concluded that regulatory quality is not playing a significant moderator role of the financial development towards inclusive growth in selected economies of south Asia. Drawing the inferences from the results of the study it is suggested that to expand the financial inclusion by supporting the digital financial services particularly in marginalized areas.