Chief Economic Adviser V Anantha Nageswaran delivered key insights on financial inclusion at the Global Inclusive Finance Summit in New Delhi, emphasizing that economic growth serves as the foundation for sustainable financial inclusion. His remarks highlighted the interconnected relationship between economic development and natural financial system participation.

Economic Growth as Natural Financial Inclusion

Nageswaran articulated that economic growth itself represents the strongest and most sustainable form of financial inclusion. He explained that when an economy generates jobs, incomes, markets and demand, people naturally enter the financial system without coercion. "They enter naturally...because they see opportunities, they invest, because the future looks larger than the present," he stated.

The Chief Economic Adviser emphasized that no amount of financial institutions can substitute for what economic growth provides, positioning finance as a complement to growth rather than a replacement. He noted that where livelihoods remain stagnant, inclusion becomes fragile, while expanding livelihoods create self-reinforcing inclusion processes.

PM SVANidhi Success Story

Nageswaran highlighted the PM SVANidhi scheme as a practical example of effective inclusive finance. Street vendors, who faced severe challenges during the pandemic, utilized access to working capital not merely for survival but for business expansion and sustainability.

The scheme created transaction records for millions previously invisible to the formal banking system, demonstrating how inclusion should enable people to move from survival trading to productive operations.

Critical Perspectives on Financial Inclusion

The Chief Economic Adviser provided nuanced views on measuring and implementing financial inclusion effectively. He cautioned that inclusion should be understood as a journey rather than mere statistics, questioning whether finance truly helps people achieve economic independence beyond basic system entry.

Nageswaran warned against indiscriminate lending that destroys financial inclusion's purpose, leading to stress and over-indebtedness rather than empowerment. He emphasized that inclusive finance succeeds when it strengthens real economic activity rather than becoming an end in itself.

Recommendations for Financial Institutions

Nageswaran outlined specific expectations for different stakeholders in the inclusive finance ecosystem:

For Mainstream Banks:

• Actively absorb proven borrowers from government schemes into core portfolios
• Offer regular loans, insurance, and working capital lines beyond scheme benefits
• Treat beneficiaries as regular customers rather than special cases

For Investors:

• Accept lower financial returns in exchange for social returns
• Explicitly price in social impact when evaluating investments
• Recognize inclusive finance institutions as intermediaries for economically vulnerable sections

Alignment of Finance with Economic Activity

The Chief Economic Adviser concluded that when finance properly aligns with real economic activity, it becomes a powerful catalyst for growth. This alignment ensures that financial inclusion contributes meaningfully to economic development rather than creating unsustainable debt burdens or artificial market distortions.

Chief Economic Adviser V Anantha Nageswaran delivered key insights on financial inclusion at the Global Inclusive Finance Summit, emphasizing that economic growth itself represents the strongest and most sustainable pathway to bringing people into the formal financial system. His remarks highlighted the critical relationship between economic expansion and natural financial system adoption.

Economic Growth as Natural Financial Catalyst

Nageswaran explained that when economies actively generate jobs, incomes, markets, and demand, individuals do not require forced integration into financial systems. "They enter naturally because they see opportunities, they invest, because the future looks larger than the present," he stated. The CEA emphasized that no amount of financial institutions can substitute for what economic growth provides, positioning finance as a complement to growth rather than a replacement.

The relationship between economic activity and inclusion follows a clear pattern: where livelihoods remain stagnant, inclusion becomes fragile, while expanding livelihoods create self-reinforcing inclusion processes. This dynamic demonstrates why properly aligned finance can serve as a powerful catalyst for growth when connected to real economic activity.

PM SVANidhi Success Story

The PM SVANidhi scheme exemplified successful inclusive finance implementation during challenging economic conditions. Street vendors, who faced severe impacts during the pandemic, utilized working capital access not merely for survival but for business expansion and asset investment.

This initiative demonstrates how inclusion should function—enabling people to move from fragility toward economic independence and transitioning from survival-based trading to productive operations.

Banking Integration and Investment Approach

Nageswaran outlined specific requirements for financial institutions to maximize inclusion effectiveness. Banks must integrate individuals graduating from government credit support schemes into their core portfolios, while investors in inclusive finance institutions should accept lower financial returns in exchange for social returns.

The CEA emphasized that mainstream banks must actively absorb proven borrowers, such as PM SVANidhi beneficiaries, into regular banking relationships. This integration should include:

• Regular loan products
• Insurance coverage
• Working capital credit lines
• Full portfolio inclusion beyond scheme-specific benefits

Measuring True Financial Inclusion

Traditional metrics focus on quantitative measures like bank account numbers, loan disbursements, and mobile wallet activations. However, Nageswaran stressed that genuine inclusion represents a journey rather than a destination. "The real question is not whether people have entered the financial system, but whether finance is helping them move towards economic independence," he explained.

The CEA warned against indiscriminate lending practices that destroy financial inclusion's fundamental purpose, leading to stress and over-indebtedness rather than empowerment. Inclusive finance institutions serve as crucial intermediaries for economically vulnerable populations, requiring careful balance between accessibility and responsible lending.

Impact Investment Framework

True impact investing requires explicit social return pricing while accepting reduced financial returns. This approach recognizes that inclusive finance institutions operate differently from traditional financial entities, prioritizing social outcomes alongside financial sustainability. The PM SVANidhi scheme creates transaction records for millions previously invisible to formal banking systems, establishing essential bridges between formal and informal economic sectors.