From Financial Inclusion to Financial Empowerment: A Panel Data Analysis of Indian States (2015–2025)

Abstract

This research paper investigates the profound transition from basic financial inclusion to substantive financial empowerment across 28 Indian states and 8 Union Territories over the decadal period from 2015 to 2025. While India has achieved near-universal bank account ownership through the Pradhan Mantri Jan Dhan Yojana (PMJDY), reaching 54.97 crore accounts by 2025, the research identifies a significant "agency gap" where access does not uniformly translate into economic agency. Utilizing a balanced panel data approach and constructing a multidimensional Financial Empowerment Index (FEI) through two-stage Principal Component Analysis (PCA), the study evaluates the longitudinal impact of digital public infrastructure (DPI), financial literacy, and institutional credit on household-level empowerment. Empirical findings from Fixed Effects and Random Effects models indicate that digital transaction intensity—specifically through the Unified Payments Interface (UPI)—and MSME credit penetration are the most potent catalysts for empowerment, with UPI volumes surging to 186 billion transactions in FY 2024-25. However, significant spatial heterogeneity persists; states like Karnataka, Maharashtra, and Telangana exhibit high "digital depth," while lagging regions like Bihar and Uttar Pradesh face structural bottlenecks despite high account saturation. The paper concludes that while inclusion provides the "rails," empowerment requires a shift toward demand-side capability and gender-disaggregated credit interventions.