Measurement of Financial Inclusion Disparity Among Indian States: An Empirical Study using Wroclaw Taxonomic Methodology

Abstract

Financial inclusion is an essential aspect of economic growth. A well-designed financial system significantly aids in the development of a nation, encourages individuals to save, combats poverty and lessens inequality. Finance inclusion is usually accepted as the primary gauge for the expansion of any economic activity. Therefore, this article aims to provide more exhaustive insight into the performance of financial inclusion at the sub-national level in India. The study has adopted the Wroclaw taxonomic method for developing the composite index of financial inclusion in India, covering the period from 2012 to 2022. The Financial Inclusion Index (FII) is a multi-dimensional phenomenal index that measures many aspects of financial inclusion on a scale from zero to one, where “zero” represents total financial exclusion and “one” means complete financial inclusion in an economy. The results show that Chandigarh is ranked 1st out of the 34 states and UTs with an FII value of 0.09. Bihar has the lowest FII score of 0.75, placing it at 34th in India. The current study will assist the policymakers, government and Reserve Bank of India in formulating policies on financial inclusion in India.

Keywords: Disparity, Economic Activity, Financial Inclusion, Poverty, Wroclaw Taxonomic

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