Financial Integration, Structural Asymmetries, and Livelihood Resilience: Empirical Evidence from a Macro-Micro Analysis of Odisha, India

Abstract

Background: Despite macroeconomic expansion, Odisha exhibits a stark economic divide between its coastal hubs and tribal interior blocks, with this vulnerability frequently worsened by recurring severe climate shocks. Objectives: This study quantifies the growth elasticity of financial inclusion on district economic output, evaluates its efficacy in mitigating household inequality, and isolates the causal impact of gender-led banking networks. Methodology: A mixed macro-micro framework is utilised. Macro-level trends are modelled using a two-way District Fixed-Effects regression tracking 30 districts over 15 years (N = 450). Micro-level dynamics are analysed using a primary field survey of N = 860 households, evaluated through simultaneous quantile regressions and an Instrumental Variable Two-Stage Least Squares (IV-2SLS) model using block-level Bank Mitra density as an external instrument. Findings: The macro panel indicates a positive growth elasticity, showing that a 0.1-unit improvement in the multidimensional Index of Financial Inclusion drives a 2.37% expansion in real Gross District Domestic Product (β = 0.2370, p < 0.001). Quantile estimates indicate that financial empowerment forms a progressive safety floor, yielding a robust income buffer (β = 0.4628, p < 0.001) for the poorest households (τ = 0.10) that directly dampens climate-shock damage (β = -0.3124, p < 0.001). The second-stage IV-2SLS model confirms that a 1-unit increase in the endogeneity-corrected female financial empowerment index (FinEmp) drives a 0.8017-standard-deviation increase in formal household savings (p < 0.001), supported by a strong Cragg-Donald F-statistic of 598.23. Conclusion: Expanding gender-led intermediary banking networks such as Mission Shakti provides state planners with a statistically supported pathway to compress the rural-urban Gini coefficient and build climate-resilient economic growth.