Financial Inclusion of Indian States:An Empirical Analysis

Abstract

Financial inclusion is one of the most important policies for economic development. India has also taken measures to accelerate financial inclusion. This paper, incorporating data on traditional and modern banking services as well as data related to transactions of Self-help Groups (SHGs)- linked with banks, re-examines the position of different states in terms of financial inclusion. Researchers have used modified version of Sarma’s (2008) multidimensional index and Principal Component Analysis (PCA). Formal banking services have been found to be the main factors in including the financially excluded. Most states have achieved a low rate of financial inclusion. Western, southern and some northern states have done better, whereas north-eastern states have lagged behind.