Financial Inclusion in Haryana

Finance is a powerful intervention for economic development and over the last decade or so the financial sector in India has undergone rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. However, the banking sector is the major player in the financial sector ecosystem. The central government has introduced several landmark reforms in the financial sector which have had an impact on the working of the sector at the individual state-level too. The financial sector’s growth has also been cushioned by a rise in rural demand which in turn has been catalyzed by a rise in rural wages across farm and non-farm sectors. As a result, various states have seen a proliferation of branches of regional rural banks (RRBs) and a rise in credit-deposit ratio over the years.

Despite rapid strides made in the penetration and spread of the financial sector across various states, formal finance does not appear to have adequately permeated vast segments of our society, although progress is being made.

As per the CRISIL Inclusix score, there has been a wide disparity observed in the performance of various states. States such as Gujarat followed by Rajasthan have seen a maximum jump in their financial inclusion scores over the years, while among the non-special category of states, Uttar Pradesh and Madhya Pradesh have fared poorly. The untiring efforts of both the centre and state governments on the financial inclusion front are expected to help achieve greater success in the years to come.

The state in focus is Haryana. As per the advance estimates, the state is expected to grow at an impressive rate of 8 per cent in FY18 as compared to 8.2 per cent in the previous fiscal and the national average of 6.5 per cent. A sharp correction in the agriculture sector growth from 10.4 per cent in FY17 to 2.4 per cent in FY18 is expected to drive the mild moderation in growth. Industrial and service sector is expected to perform well in FY18 as compared to the previous year. In terms of attracting investments, the state has registered an improved performance as net equity FDI flows posted a sharp increase of over 30 per cent in FY18 over the previous year. On the socio-economic front, though the state has shown an improvement across the major parameters, a skewed sex ratio is an area where the policymakers need to pay more attention as it remains way below the national average.

Rise in demand for financial sector services in the states across the years

  • Over time, the rise in rural income has translated into a rise in per capita levels in the rural areas across major states, which in turn has increased the demand for financial sector services.
  • This is borne out from the fact that most states (with the exception of a few) have seen a rise in credit-deposit ratios over the period 2000-2017, which is a sign of rise in financial services across the states. Also, except, Madhya Pradesh, all the major states have seen a sharp rise in the number of regional rural banks (RRBs) over the years.

Adoption of JAM trinity has further led to a intensification of financial services across the states

  • The spread of financial services across states has been helped by a rapid increase in mobile penetration alongside Aadhaar which has also made it an ideal tool for low-cost financial service delivery for realising the government’s Jan Dhan, Aadhaar and Mobile (JAM) vision.
  • The improvement in provision of banking services has led to an improvement seen in the latest CRISIL Inclusix scores (which is India’s most comprehensive and granular index that measures the progress of financial inclusion across India) across almost all the major states over the years. This is discussed in detail below.

Financial inclusion gathers momentum in the major states

  • For the first time, Kerala moved to the top spot with a CRISIL Inclusix score of 90.9 in 2016. Most states saw an improvement in their scores in 2016 propelled by a significant increase in the number of deposits, largely because of the Jan – Dhan initiative and increase in credit penetration.
  • In terms of measuring improvement in the last four years, Gujarat followed by Rajasthan have seen a maximum jump in their financial inclusion scores. This is driven by progress seen in both credit and deposit penetration in these states.
Note: A Score of above 65.0 denotes high level of financial inclusion and value below 35.0 denotes low level of inclusion
Source: RBI and CRISIL Inclusix (Feb 2018, Vol 4). 

Economy of Haryana is on an uptick with growth in FY18 expected to be higher than national average

  • As per the advance estimates of GSDP, Haryana is expected to grow by 8 per cent in 2017-18 as compared to the national average of 6.5 per cent. Within GSDP, agriculture growth is expected to sharply crash to 2.4 per cent in 2017-18 after logging double-digit growth in the previous year. Industrial growth is expected to accelerate.
  • Service sector is leading the growth process as it is expected to print an impressive growth of 9.4 per cent in 2017-18. Moreover, the composition of state GSDP has shown a structural bend towards the services sector, which is a sign of a developing and mature economy.

Investment trends in Haryana remain robust; most indicators are higher than the national average

  • Haryana attracted FDI worth US$7.7 billion in 2017-18, posting a sharp increase of over 30 per cent over the previous year. Owing to its strategic location and its proximity to New Delhi, the state makes for an attractive FDI destination.
  • Investment trends in the state remain healthy as depicted by the growth in gross fixed capital formation. Average growth in investment spending during the period FY14-FY16 in Haryana stood at 6.6 per cent, while the comparable figure at the national level was an anemic 3.1 per cent.

Though the sex ratio has improved, but it is still skewed when compared to all-India levels

  • Haryana has done well on the various socio-economic indicators as well, with its infant mortality rate falling from 67 in 2000 to 33 in 2016.
  • Though the state has seen an improvement in sex ratio also over the years-it stood at 879 in 2011 from a low of 861 in 2001, however it is much worse than the all-India sex ratio of 943 in 2011.


Source: NITI Aayog, Economic Survey of Haryana (2017-18) and RBI


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