Financial Inclusion and Regional Inequality in India: Insights from the Financial Inclusion Index & PMJDY

Abstract

This study analyzes the extent of financial inclusion across India’s 36 states through the development of a Multidimensional Index for Financial Inclusion (IFI). The IFI is constructed using three core dimensions penetration, availability, and usage of banking services offering a comprehensive measure of financial inclusiveness. Financial inclusion serves as a critical driver of equitable economic growth by ensuring access to affordable financial services, including savings, credit, insurance, and remittance facilities. India’s journey toward inclusive finance has evolved through multiple policy milestones, beginning with bank nationalization and rural credit expansion, and advancing through recent digital initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) and issuance of Rupay Debit card. These efforts have substantially improved account ownership and the adoption of digital financial services. However, significant disparities persist, particularly in rural and marginalized regions where access and usage remain limited. The findings of this paper provide valuable insights for policymakers, highlighting the need to strengthen institutional frameworks and enhance financial literacy to achieve inclusive growth. Despite noteworthy progress, the continued exclusion of large population segments underscores the importance of making financial inclusion a central component of India’s sustainable development and economic empowerment agenda.

Keyword: Regional Disparity, PMJDY, Financial Inclusion,FII, EAG States.