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The Extent of Financial Inclusion in the North-Eastern States of India

Debananda Behera

PhD. Scholar
Department of A & A Economics
Utkal univesity
Bhubaneswar, Odisha

Swayamprava Mishra

Assistant Professor in Economics
Utkal University
Bhubaneswar, Odisha


Financial development is not simply a result of economic growth; it is also the driver of economic growth. Financial inclusion (FI), a feature of financial development, is a process that marks improvement in quantity, quality, and efficiency of financial intermediary services. A large section of population in rural and urban areas still remains outside the coverage of formal financial system where they don’t have access to basic financial services like savings account, credit, remittance, insurance etc. In a developing country like India achieving inclusive growth is a mammoth task. The promotion of an inclusive financial system is a policy priority in many countries. While the importance of financial inclusion is widely recognized, the literature lacks a comprehensive measure that can be used to measure the extent of financial inclusion across economies. Financial inclusion has been emphasized as an important policy option aimed at alleviating poverty, minimizing social exclusion, enhancing economic growth and is an important process to attain the goal of inclusive growth. In this regard a study has been carried out to understand the extent of financial exclusion in India and initiatives taken for inclusive growth. This paper attempts to fill this gap by proposing a multidimensional Index of Financial Inclusion (IFI) for North-Eastern States of India by taking the case of Scheduled Commercial banks from 2006 to 2014.The proposed IFI captures information on various dimensions of financial inclusion in one single number lying between 0 and 1, where 0 denotes complete financial exclusion and 1 indicates complete financial inclusion in an economy. The study found that among North eastern states of India Sikkim had highest IFI i.e. 1 and Manipur has lowest i.e. 0 in 2006. But in 2014, Meghalaya occupied highest IFI i.e. 0.5271 and Nagaland occupied lowest IFI 0.0565.

Key words: Financial Inclusion, IFI, Multi-dimensional Index, Normalized Inverse, Euclidean Distance, Financial Exclusion.

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