Title: Macroeconomic determinants of financial inclusion in India: an econometric perspective

Authors: Bhagirath Prakash Baria; Devanshi Himanshu Mehta

Addresses: Faculty of Commerce, The Maharaja Sayajirao University of Baroda, Vadodara, Gujarat, India ' Faculty of Commerce, The Maharaja Sayajirao University of Baroda, Vadodara, Gujarat, India

Abstract: Even though India has achieved significant milestones in improving financial access, there persists a large unbanked population whose financial participation can be leveraged for inclusive development. This paper examines India's tryst with financial inclusion from a macroeconomic perspective by employing a uniquely composed financial inclusion index while also modelling its determinants. Time-series data on diverse macroeconomic forces such as output growth, inflation, financial services cycle, and financial infrastructure are causally juxtaposed with financial inclusion. The study timeframe covers the entire post-reform period. A reduced-form single-equation econometric framework is employed. Findings indicate that the macroeconomic forces have shown prominence in shaping financial inclusion, challenging the predominance of microeconomic factors in the literature. Results are robust on both theoretical and econometric grounds. Novel insights are offered on the macroeconomics of financial inclusion in emerging economies like India along with valuable lessons for future developmental strategies.

Keywords: development economics; econometric modelling; financial cycles; financial inclusion; macroeconomics; India.

DOI: 10.1504/IJSE.2025.148990

International Journal of Sustainable Economy, 2025 Vol.17 No.4, pp.397 - 422

Received: 03 Apr 2024
Accepted: 29 Jul 2024
Published online: 07 Oct 2025 *

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