Determinants of rural financial inclusion in India: A short note using the AIDIS 2019

The present study utilizes the latest All India Debt & Investment Survey released in 2019 to examine the factors shaping rural financial inclusion across 28 selected states of India. A fresh set of socio-economic factors are incorporated into the analysis of financial inclusion determinants identified through a rigorous review of literature. Rural asset ownership including land, rural wealth inequality, education, rural population density, and rural unemployment are located as the key determinants. Elasticities of financial inclusion, measured from a deposit perspective, concerning these variables are worked out using a log-log regression model. The study found that improvements in the level of wealth ownership, education, and population density can promote rural financial inclusion. However, inequality in distribution of rural wealth, higher land ownership amongst indebted households, and higher rural unemployment worsens financial inclusivity in rural India. Furthermore, results show considerable robustness across gender-based inclusion measures; though, the size of the estimated elasticities differs across gender-specifications of financial inclusion.