Inter-state variation in digital economy in India: Is there any role of digital and financial literacy?

Innovation in Information, Communication and Technology (ICT) has brought the ‘Digital Economy'at the centre stage for fostering growth and development in the context of the present information age. The strength of the digital economy lies in its spill-over effect that promotes economic growth, ability of lowering non-accelerating inflation rate of unemployment, equilibrating inflation and unemployment in short run, introducing of innovative and quality products and services, dampening the business cycle (which allows the economy to operate at full capacity) and controlling corruption. However, the transformation into the digital economy is conditioned upon the state of the financial and digital literacy in the context of the present knowledge economy. The existing literature clearly suggests that there is scanty literature on various aspect of digital economy by synthesising the role of both financial and digital literacy. In this prelude, the present study makes a modest attempt to highlight the state of the Digital Economy Infrastructure (DEI) of major Indian States by constructing DEI Index and the changing scenario of such infrastructure over 2014 to 2017. Moreover, the association between the sub-components of DEI Index (use and access of digital economy infrastructure) with the Financial Literacy and Digital Literacy has also been explored using Canonical Correlation Analysis (CCA). The outcome of the study suggests that Punjab, Kerala, Tamil Nadu and Karnataka has consistently performed well in terms of DEI over the study period whereas the DEI was found to be poor for Bihar, Assam, Orissa, Uttar Pradesh and Madhya Pradesh during the entire period of study. However, significant improvements in terms of DEI during the period of study could be observed for Himachal Pradesh, Jammu & Kashmir, Gujarat and North Eastern States. The outcome of CCA clearly indicated the existence of a high degree of association between the DEI Index (consisting of use and access of digital economy infrastructure) and Skill Index (consisting of financial and digital literacy). Moreover, the empirical results of CCA also suggested that the effect of digital literacy on the DEI Index was found to be stronger than that of financial literacy.