Measuring Financial Inclusion of Indian States : An Empirical Study

This paper examines the financial inclusion of Indian states by applying the financial inclusion index (FII) using the secondary data. The present study found that no state in India belongs to high financial inclusion (0.5 < FII < 1) group during the study period. Kerala (0.4116) secured the first rank in FII followed by Goa (0.4016), Delhi (0.356), Punjab (0.33), Tamil Nadu (0.3279) and West Bengal (0.31). These states were categorized under the medium financial inclusion (0.3 < FII < 0.5) and rest of the states had low financial inclusion (0 < FII < 0.3). Madhya Pradesh (0.1066) secured the last rank in comparison to other states of India. Regression results show that per capita income of households, literacy rate and the number of SHGs affect the FII positively and significantly. The study suggested that policymakers should increase banking penetration and availability of banking services to push the usage of the banking system. Moreover, there is a need for a comprehensive financial inclusion plan for India as a whole along with region-specific inclusion plans