Unveiling the factors influencing financial inclusion in India : a comprehensive analysis

Financial Inclusion (FI) is one of the most important indicators of inclusive growth of an economy. This paper examines the status of FI in India by constructing a comprehensive financial inclusion index (FII). The data analysis indicates that states such as Goa, Kerala, Tamil Nadu, Maharashtra, and Telangana performed well in FI. Further, a panel data regression model is estimated to know the determinants of financial inclusion in 27 Indian States for the period 2005 to 2020. The composite index can be used to monitor and assess financial inclusion over time and at the grass root level also. The estimated results show that per capita NSDP, literacy rate, urban population share, road length, and number of factories are perhaps the most important financial inclusion determinants. The novelty of this study is to provide a comprehensive understanding of financial inclusion levels across different states in India for two-decade period along with rural and urban financial inclusion levels. The study serves as a critical resource for understanding the dynamics of financial inclusion in India for the two decades period and offers valuable insights for policymakers by identifying key determinants and guide the development of targeted policies aimed at improving financial inclusion, which is essential for economic growth and development.