DISTRICT-LEVEL CONVERGENCE AND PUBLIC BANKS IN INDIA

This study updates previous findings on district level convergence in India and analyses the role of financial development on economic growth. Using a new nighttime light product as a proxy for economic activity, it finds an absolute rate of convergence of 2.4 percent from 2013 to 2019. Conditional on socioeconomic characteristics, the rate of convergence was 3.7 percent. Stronger initial financial development resulted in faster subsequent growth, with the effect being twice as large for credit extended by public banks compared to credit extended by private banks. For districts with below median nighttime light intensity in 2013, the impact of public credit was three times larger, indicating a strong developmental role of public banks in India