Chief Economic Adviser V Anantha Nageswaran on Tuesday said economic growth itself is the strongest and most sustainable form of financial inclusion.
"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," he said at the Global Inclusive Finance Summit here.
"No amount of financial institutions can substitute for what economic growth can provide. Finance is a compliment to growth, not a replacement for it." Where livelihoods are stagnant, inclusion becomes fragile, and where livelihoods are expanding, inclusion becomes a self-reinforcing process, he said.
So, when finance is properly aligned with real economic activity, it can become a powerful catalyst for growth, he said.
Observing that inclusive finance succeeds when it strengthens real economic activity, not when it becomes an end in itself, he said that under the PM SVANidhi, street vendors, who were hit hardest during the pandemic, used access to working capital not just to survive, but to expand, invest in basic assets, improve margins and build more sustainable businesses.
This is what inclusion should mean -- enabling people to grow out of fragility and move from survival trading to more productive operations, he said.
He also said that banks have to include people graduating from the government's credit support schemes in their core portfolios, and investors in inclusive finance institutions need to accept lower financial returns in exchange for social returns.
"We count the number of bank accounts, the number of loans dispersed and the number of mobile wallets activated. But inclusion, properly understood, is not an estimation; it is a journey. The real question is not whether people have entered the financial system, but whether finance is helping them move towards economic independence," Nageswaran said.
He also flagged that financial inclusion that leads to indiscriminate lending destroys its purpose, resulting in stress and over-indebtedness rather than empowerment.
The chief economic advisor said inclusive finance institutions are intermediaries for the economically vulnerable section, and that true impact investing means explicitly pricing in social return and accepting lower financial return in exchange.
He also emphasised that mainstream banks must actively absorb the new proven borrowers, such as PM SVANidhi beneficiaries, into their core portfolios, offering regular loans, insurance, and working capital lines, not just as scheme beneficiaries.
The scheme acts as a bridge between the formal and informal sectors by creating transaction records for millions of people who were previously invisible to the formal banking system.
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