Question

What is inclusive growth financial inclusion?

Answer 1

Inclusive growth is the biggest challenge that the nation faces and it is important to ensure that while the Indian economy grows rapidly, all segments of society are part of this growth process, preventing any regional disparities from derailing such growth. Thus, there is an urgent need today to provide financial services to all households that are excluded from formal financial services. Here, it must be remembered that the financial sector is probably the only sector that has the ability to act as a facilitator and multiplier for overall economic growth and stability. A well spread out financial system engenders economic activity by mobilising savings into the formal financial system, providing an avenue to urban workers to remit money to their families in villages besides weaning them away from the clutches of usurious moneylenders. This is even as it connects all parts of the country to the market economy and mitigates risks by ensuring that the poor have access to a variety of social security products, like micro-savings, micro-credit, micro-insurance, and micro-pension products.

Financial inclusion has been identified as a priority sector in the government’s efforts to make the growth process more equitable and inclusive, and technology is playing a pivotal role in this process by reducing the cost of delivery while increasing the sector’s efficiency and productivity. It is recognised by all that in the long run, the financial services sector must have the ability to service the entire real sector of the economy. This shall increase its efficiency, vibrancy, effectiveness and productivity of the real economy. The objective of the financial deepening process is to ensure the creation of adequate social security nets that shall provide citizens with a choice of financial products, including pension, insurance and saving instruments. It will also enable the household sector to convert physical assets into financial assets, which can be leveraged for productive activities spurring economic activity. Financial Inclusion is also important as it provides an avenue to the poor for bringing their savings into the formal financial system. It is thus essential to extend banking services to the rural hinterland at the earliest in order to include these regions in India’s growth story. The provision of banking and financial services to the rural hinterland will be an enabler for inclusive growth.