Bank-Led Financial Inclusion and Human Development:Evidence from India

Financial inclusion and equality of finance are topical on the agenda of ‘inclusive growth’, especially in a class inequality smitten country like India. With this backdrop, the study proposes an Index of Financial Inclusion (IFI) and uses it to examine the magnitude and spread of financial inclusion in 25 states, 4 Union Territories (UTs), and 6 geographic regions of the country. It also examines the nature and extent of its relationship with the level of human development for the year 2007-08; and further proposes a modified and financial inclusion incorporated measure of human development. The results indicate high financial inclusion in Chandigarh, Delhi and Goa throughout the period of the study. The states of the Southern region of the country reflect the maximum progression in financial inclusion. On the flip side, the North-Eastern region of the country, along with its constituent states exhibits a tremendously poor stance of inclusion. With the exception of these (North-Eastern) states, financial inclusion and human development are noted to be highly correlated. Additionally, financial inclusion (IFI), prosperity of states (Per Capita Net State Domestic Product) and Human Development Index (HDI) reflect a tandem movement with each other. Equality of access to finance is imperative to ensure human development, thus, financial inclusion should also be considered as a dimension of social/human development.