Leveraging financial inclusion for economic growth in India

Financial Inclusion has been the prime objective of the Reserve Bank of India and Government of India to bring all the excluded sections of society under the organized financial system to ensure better access to and usage of financial services for the growth of the Indian economy. Several policy initiatives of the RBI and the schemes of the Commercial Banks have been implemented to achieve the target of Financial Inclusion.

The study has highlighted the supply (access to financial services) and demand (usage of financial services) indicators of Financial Inclusion and constructed an Index of Financial Inclusion. The Index of Financial Inclusion which is the weighted arithmetic mean of the dimensions of Financial Inclusion for the ten year period 2001 – 10 is low. Principal Components Analysis technique has been used to derive the importance of the indicator in determining the index. The study has revealed that Financial Inclusion has a high positive and significant correlation with economic growth represented by Gross Domestic Product and Gross Domestic Product Per Capita. The role played Business Correspondents, General Credit Cards and ICT have led to a considerable progress of financial inclusion in India.