Financial inclusion and equitable growth: A study of Indian States

Financial inclusion facilitates efficient allocation of productive resources and thus can potentially reduce the cost of capital of diverse resources in the country. In that way financial inclusion paves the way for delivery of credit and other financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. Hence financial inclusion is important for equitable growth of all states of country. Financial inclusion is not a destination but a journey. To achieve sustainable development, maximum number of participation from all the sections of the society is inevitable. Accessibility, affordability, appropriateness and benefits determine how deep financial inclusion penetrates the society and signals equitable growth among all the sections of the society. Financial inclusion is a very useful tool for financial growth of India. To analyses the position of financial growth in India an attempt has been made in the present study with objectives to study the status of financial inclusion in different states in India and to examine the linkages between financial inclusion and equitable growth has been incorporated. A multidimensional composite index has been prepared to measure financial inclusion with the help of selected factors for the period 1997 to 2013. Regression analysis has been used to find linkages among identified variables. The state wise panel data spanning over a period from 1997 to 2013 has been considered for the study. Among all the regions, Northern region has shown the maximum growth in financial inclusion in year 2013 with 19.79% growth in comparison to year 1997 followed by North-Eastern region has registered 3.4% growth in year 2013 in comparison to year 1997. Central region has shown the worst results so far with negative growth of 23.5% followed by Eastern region with (– 13.5%) in year 2013 in comparison to year 1997. Though Western region was amongst top three regions for financial inclusions, even if it has also shown negative growth(−5.4%)in year 2013 in comparison to year 1997. As far as Southern region is concerned, it has shown steady figures but demonstrated diminished figures in year 2013 in comparison to year 1997 and recorded (−1.2%) growth in financial inclusion.

Accounting and statistical tools used in present study may suffer from certain limitations and hence findings of the study might have been affected by them.