Assessing the spatiotemporal financial inclusion and its determinants: a sub-national analysis of India

This paper assesses the variability in financial inclusion and its determinants for Indian states categorized by income groups and geographical regions for two periods: United Progressive Alliance (UPA) (2011–2012) and National Democratic Alliance (NDA) (2018–2019)-led political regimes. We found that the coefficient of variation (CV) for financial inclusion index increased from 0.893 to 0.910 during the two periods. In addition, across six major geographical regions of India, the southern region had the highest rank in the financial inclusion index, while the north-eastern region was the lowest in terms of financial inclusiveness during both periods. Interestingly, Gujarat (western) and Jammu–Kashmir (northern) showed substantial improvement in terms of the level of financial inclusion from 2011–2012 to 2018–2019. The estimated Tobit model regression results suggest that factors such as per capita GSDP, number of factories, and ease of doing business have a significant positive impact in accelerating financial inclusion in 2011–2012. While in 2018–2019, we found that along with these factors, per capita power consumption, length of national highways and length of railway routes are also positively significant in determining financial inclusion. This may arise because of the emphasis on the development of infrastructure and energy sectors during the NDA-led political regime. Therefore, the relevance of such policies to accelerate financial inclusiveness in the most deprived regions is reflected.