Developing a Financial Inclusion Index and Inclusive Growth in India

Abstract

Financial inclusion is one of the systems through which Inclusive Growth can be achieved in developing countries like India where large sections are unable or hopeless to contribute in the financial system. An inclusive financial system mobilizes more resources for productive purposes leading to higher economic growth, better opportunities and reduction of poverty. This study, proposed an Index of financial inclusion-a multidimensional measure. The Financial Inclusion Index can be used to compare the range of financial inclusion across different economies and to monitor the progress of the economies with respect to financial inclusion over time. From the computation of Financial Inclusion Index of India, it is evident that during 2010 to 2012 (Demand side dimensions such as: banking penetration, availability of banking services, usage of the banking system), India is categorised under the full financial inclusion or high financial inclusion and during 1987-1988 and 1989-2009 (Supply side dimensions such as: access to saving, access to insurance, bank risk), India is categorised under the low financial inclusion. Here, the major difference between the demand side and supply side indicators of Financial Inclusion Index during the period 2010 to 2012 is that, the India is categorised under the high financial inclusion in case of demand side dimensions but low financial inclusion in case of supply side dimensions.

Advancing inclusive growth in Nigeria: The role of financial inclusion in poverty, inequality, household expenditure, and unemployment

“…(1) In order to examine the empirical relationship between financial inclusion and inclusive growth, financial inclusion will be decomposed into the three core dimensions of financial inclusion as follows: financial penetration (number of deposit bank account holders per 1,000 population); access or availability of financial services (number of bank outlets per 100,000 populations, ATM per 100,000 people, and/or access to internet for financial services); usage of financial services (outstanding credit to private sector relative to the GDP); as in literatures (see Sharma, 2016;Sarma & Pais, 2011;Sethy, 2016;Qazi, 2018;Nyarko, 2018). Similarly, inclusive growth will also be decomposed into participation dimension (employment) and benefit dimensions (poverty, inequality and household consumption expenditure), as in Nyarko (2018).…”

“…Overtime, it has been argued that economic growth is a powerful instrument for poverty reduction, and the improvement of the standard of living and quality of life in developing countries (David, Sakanko & Ladan, 2019). However, in recent time, due to the eclipse of robust and remarkable growths by associated high level of poverty, unemployment and inequality rates, among other precarious development indicators, especially in developing countries (Adediran, Oduntan & Matthew, 2017;Zulfiqar, Chaudhary & Aslam, 2016), the principle of inclusive growtha concept that advances equitable opportunities for economic participants during economic growth, with benefits incurred by every section of society (Ranieri & Ramos, 2013;Anand, Mishra, & Peiris, 2013 has assumed greater level of importance as a result of its strategy, which encompasses the key elements of an effective poverty reduction strategy, and more importantly, the expansion of the development agenda, and the equitable distribution of wealth and prosperity, among others (Adamu & Suleiman, 2018;Sethy, 2016).…”

Financial Inclusion in India: Are We There Yet?

“…Inclusive growth is basic for economic development of a nation in which each person should be a piece of the development (Sharma, Didwania, and Kumar, 2014).Inclusive growth of any state can be advanced through Financial Inclusion. It should be contributed by massive sections of society (Sethy, 2016). Needy persons require financial services to help themselves and deal with their livelihoods (Murdoch and Rutherford, 2003).It empowers individuals to access financial marketsthat help in better management of danger.It is crucial to allow credit for farm investments to raiseyield, to expand post-harvest practices and constant household cash movement (Dnmeher and Abdulai, 2012).…”

Reaching sustainable development goals: Bringing financial inclusion to reality in India

“…Sethy (2018) has put forward that the financial inclusion should be achieved by all the countries of the world and the banking facilities should be made available to areas where its penetration is low. Usage of banking facilities is an important parameter for measuring the development of a country.…”