Financial Inclusion: A Path towards National Prosperity

Abstract

India is recognized, all over the world, as a country which presents great diversity in terms of geography, history, culture and population demography to underline a few. This diversity makes it extremely difficult to suitably categorize the country on economic, political, religious or demographical grounds. Post-independence growth has led to overall growth of the country as a whole but it has also divided it into two distinct segments thus providing a suitable basis of categorization in the form of rural India and urban India. As per the census 2001 only 31.16% population of the country lives in urban segment while the rest are still residing in the inherently characteristic rural India. The situation however has changed significantly since independence when around 82% of the total population of the country was dependent for their livelihood on rural sector. The rural segment is distinct in respect of various features such as purchasing power, economic and infrastructural development, social system and many more. These distinctions relate directly to the kind of divergent demand patterns that the rural sector has in various product segments especially when it comes to financial services. The sector presents a real challenge given its technological backwardness and mass illiteracy as people are still caught in traditional financial systems that are both exploitative and futile. Financial inclusion is the biggest problem in front of the financial system today in rural India and infrastructural bottlenecks are worsening it even further with each passing day. This paper is an attempt to comprehend the significance of Financial Inclusion in the context of a developing country like India wherein a large proportion of population is deprived of the financial services which are very much essential for the overall growth of a country. The paper tries to address the issues relating to access to finance by the poor and vulnerable groups as a prerequisite for poverty reduction, social cohesion and promoting prosperity - reflecting and promoting the true growth story of economically strong India.