19. Financial Inclusion in India: An Intertemporal Study

The government of India has long focused on financial inclusion as a means of development and the most recent effort is Prime Minister Jan DhanYojana (PMJDY) which has been working since 2014. This chapter analyzes the achievement in financial inclusion of Indian states and union territories during the last decade. Using the data published by RBI in BSR, we compute financial inclusion index (FII) for each sub-national units at three points of times 2011–12, 2014–15, and for 2018–19. FII has been constructed measuring the weighted geometric mean of the indicators covering three dimensions of formal financial system/services—availability, accessibility, and applicability. The weights are derived applying principal component analysis of the indicators of financial inclusion. A cluster analysis has been performed to explore the nature of similarity and dissimilarity of the sub-national units in respect of the indicators of financial inclusion at different time points. The study has found that level of financial inclusion of the sub-national units has low mean but high disparity in 2011–12 which persists even in 2018–19. Most of the southern states have performed relatively better while the north-eastern states lie behind among the states and union territories in India.