Banking activity and economic activity

Out on Capitalmind, Deepak Shenoy has an excellent post on the penetration of banking services in India, where he points out that 30% of all bank deposits in India are in Mumbai and Delhi. I encourage you to read that post in full.

Having read that, I was interested to see the per capita figures and compare them across states. On a whim, I decided to compare that to per capita state GDP and this is what I got:

Data source: RBI website Note: Maharashtra, Delhi and Goa have been left out because they are outliers. Some other states (Chandigarh, Gujarat and Mizoram) have been left out since their latest GSDP figures are not available
Data source: RBI website
Note: Maharashtra, Delhi and Goa have been left out because they are outliers. Some other states (Chandigarh, Gujarat and Mizoram) have been left out since their latest GSDP figures are not available

 

 

While the direction of causality cannot be clearly established, this clearly shows that banking penetration is highly correlated with economic activity.

2 thoughts on “Banking activity and economic activity”

  1. Interesting. Was wondering about this myself…

    Save for Sikkim and A&N Islands, I find one major outlier in Karnataka, which seems further away from the mean than any other state.

    I think this should be directly attributable to Bangalore (disproportionate share in GDP of K’taka relative to population) and a good exmple of how despite the endless cribbing of us Bangaloreans, we are still way way better off than the rest of the State.

    1. what this data shows is that Karnataka is heavily “over-banked” for its gdp. However, considering the number of banks that have their homes in Karnataka (Canara/syndicate/corporation/vijaya/karnataka/sbm) I don’t think this is surprising at all.

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