Patterns in demand side financial inclusion in India -- An inquiry using IHDS Panel Data

TL;DR

This study examines demand side financial inclusion patterns in India using IHDS panel data, analyzing changes at state and district levels, with a focus on shifts from agricultural to non-agricultural households over time.

Contribution

It provides a detailed analysis of demand side financial access in India at multiple administrative levels, highlighting shifts in access among different household types using panel data and statistical indices.

Findings

Demand for formal finance increased among non-agriculture households.

Significant regional variations in financial access shifts.

Supply side indices correlate with demand side access changes.

Abstract

In the following study, we inquire into the financial inclusion from a demand side perspective. Utilizing IHDS round-1 (2004-05) and round-2 (2011-12), starting from a broad picture of demand side access to finance at the country level, we venture into analysing the patterns at state level, and then lastly at district level. Particularly at district level, we focus on agriculture households in rural areas to identify if there is a shift in the demand side financial access towards non-agriculture households in certain parts of the country. In order to do this, we use District level 'Basic Statistical Returns of Scheduled Commercial Banks' for the years 2004 and 2011, made available by RBI, to first construct supply side financial inclusion indices, and then infer about a relative shift in access to formal finance away from agriculture households, using a logistic regression framework.