CEA: Economic Growth is India's Strongest Financial Inclusion Tool
Overview
Chief Economic Adviser V Anantha Nageswaran asserted that robust economic growth is the most potent and enduring form of financial inclusion. He explained that when an economy creates jobs, income, and demand, people naturally engage with the financial system, emphasizing that this organic process is superior to merely increasing account numbers.
Growth as the Engine of Inclusion
Chief Economic Adviser V Anantha Nageswaran declared on Tuesday that economic growth itself serves as the most robust and sustainable pathway to financial inclusion for India. Speaking at the Global Inclusive Finance Summit, he articulated that a flourishing economy, characterized by job creation, rising incomes, and robust market demand, naturally draws individuals into the financial system.
"When an economy is generating jobs, incomes, markets and demand, people do not need to be forced into the financial system. They enter naturally... because they see opportunities, they invest, because the future looks larger than the present," Nageswaran stated. He cautioned that no amount of financial institutions can replicate the impact of genuine economic expansion, positioning finance as a complement to growth, not its replacement.
Beyond Metrics: The True Meaning of Inclusion
Nageswaran underscored that financial inclusion is a journey toward economic independence, not merely an estimation of metrics like bank accounts or active mobile wallets. He highlighted the PM SVANidhi scheme as a prime example, where street vendors utilized access to working capital to not only survive the pandemic but also to expand their businesses, invest in assets, and build more sustainable enterprises. This, he noted, is the essence of inclusion: enabling people to move beyond fragility and survival towards more productive operations.
Banks' Role in Sustaining Inclusion
The Chief Economic Adviser urged mainstream banks to actively absorb individuals who have successfully navigated government credit support schemes, such as PM SVANidhi beneficiaries, into their core portfolios. This means offering regular loans, insurance, and working capital lines beyond their initial program participation. He also advised investors in inclusive finance institutions to accept potentially lower financial returns in exchange for significant social returns, acknowledging the dual purpose of such initiatives.
Nageswaran also issued a warning against indiscriminate lending, stating that financial inclusion leading to over-indebtedness undermines its very purpose. True impact investing, he reiterated, requires explicitly valuing social returns alongside financial ones.
