Multidimensional Financial Inclusion Index of Indian States

In the Indian economic structure, Sustainable Development Goals (SDGs) play a significant role in addressing complex challenges and building long-term development after COVID-19. The study intends to investigate Financial Inclusion (FI), one of the key components of SDG, and the impact of COVID-19 across 32 Indian states and Union Territories for two different periods, namely 2019 and 2022. The study has developed a multidimensional FI index using Two-Stage principal component analysis, incorporating traditional financial variables, semi-formal institutions like microfinance, digital financial variables, and insurance sector-related variables under different (accessibility, availability, and usage) dimensions. The Absolute FI score has deteriorated for states like West Bengal and Andhra Pradesh (AP) in the post-COVID period compared to their pre-COVID period. The multidimensional FI index has improved for all the Northern and North-Eastern states in the post-COVID period from the pre-COVID situation. The association between different dimensions of SDGs has been observed with the multidimensional FI index. Further applying Quantile regression, it has been confirmed that FI influences the SDG index. So, there is a need to adopt state-level policies to enhance FI as a means of sustainable development.