India’s vision for Viksit Bharat by 2047, as envisioned by Prime Minister Narendra Modi, aims to transform the nation into a $35 trillion economy from its current $3.8 trillion size. Achieving this ambitious goal requires a multifaceted approach, with financial inclusion playing a pivotal role in ensuring economic growth benefits every citizen. While infrastructure advancements in transportation, digital ecosystems, and urban development have gained momentum, integrating a larger segment of the population into the formal financial system remains a key priority.
The Need for Financial Inclusion
Financial inclusion is essential to bridging the economic divide and enhancing overall economic resilience. In developed economies like the United States and Europe, 65-70% of assets are financial, such as savings, investments, and equities. However, in India, 75% of wealth is tied to non-financial assets like real estate, gold, and durable goods, limiting liquidity and financial mobility. Encouraging greater financialization of assets will not only boost economic participation but also drive sustainable economic growth.
India's Progress in Financial Inclusion
Before 2014, only 44% of Indians aged 15 and above had a bank account, leading to inefficiencies and leakages in welfare distribution. The Pradhan Mantri Jan Dhan Yojana (PMJDY) revolutionized financial accessibility, yielding remarkable results:
• Over 500 million new bank accounts have been opened in the past nine years.
• 78% of Indians above 15 now have bank accounts.
• More than ₹2 lakh crore in deposits have been mobilized through PMJDY.
The Financial Inclusion Index, as per RBI data (2024), stands at 64.2, marking a 300-basis points improvement within a year. The success of the JAM Trinity (Jan Dhan, Aadhaar, Mobile) has significantly improved direct benefit transfers (DBT), minimizing inefficiencies and ensuring financial benefits reach the intended recipients, further reinforcing the Viksit Bharat 2047 framework.
The Role of Credit in Economic Growth
Access to credit is a crucial enabler of financial empowerment, particularly for low-income groups. The rise of microfinance institutions (MFIs) has enhanced access to credit, offering loans at relatively lower interest rates. With 30% penetration of microfinance, financial accessibility has improved. However, challenges remain:
• Responsible Lending: A sharp rise in defaults indicates a need for more stringent assessments of borrower intent and financial discipline.
• Productive Credit Utilization: Loans should primarily be directed toward income-generating activities rather than aspirational spending influenced by social media.
Challenges in Achieving Full Financial Inclusion
• Low Financial Literacy: Many citizens remain unaware of the benefits of banking, investments, and financial management.
• Digital Infrastructure Gaps: Limited internet penetration and financial service accessibility in rural regions hinder progress.
• Cybersecurity Concerns: Increased reliance on digital banking has raised risks related to fraud and online scams.
• Over-Indebtedness: The easy availability of credit, especially from MFIs, has led to unsustainable borrowing practices among vulnerable groups.
Strategies to Strengthen Financial Inclusion
To accelerate financial inclusion, the following strategic actions should be prioritized:
• Expanding Financial Literacy Initiatives: Nationwide educational programs should raise awareness of banking, digital payments, and responsible borrowing.
• Enhancing Regulatory Oversight: Strengthened monitoring of lending institutions will help prevent predatory lending and over-indebtedness.
• Encouraging Fintech Innovation: Private sector collaboration and fintech solutions can drive financial inclusion at scale.
• Promoting Responsible Credit Usage: Financial institutions should focus on loans for productive investments rather than discretionary spending.
Conclusion
India has made remarkable strides in financial inclusion, particularly through PMJDY and the JAM Trinity, which have revolutionized banking accessibility. However, sustained efforts are required to enhance financial literacy, expand digital infrastructure, and ensure responsible credit management. By addressing these challenges, India can accelerate financial inclusion and move closer to realizing the Viksit Bharat 2047 vision. The path forward demands a collaborative approach involving government bodies, financial institutions, and the private sector to build a truly inclusive and resilient economy.
About the Author
Vinod Pandey is the Head of the Micro Enterprise Loan and ArohanPrivilege Digital Loan Businesses of the Company. Earlier, he was a Deputy Business Head and has been associated with the Company since August 2015. Vinod has completed his Post Graduate Diploma in Rural Management from XISS, Ranchi, and Advance Diploma in Business Management, ICFAI. He is a seasoned professional with 22 years of diverse experience in Microfinance Industry, Livelihood Development, Rural Marketing & Life Insurance. Prior to joining the Company, he has worked with reputed organizations such as International Development Enterprise (India), Max New York Life, Kotak Life and L&T Finance.
