Micro Finance
Scene in India

Our country has a population of 139 Crores and a population growth rate of 1.548%. As per the report published (in July 2020) by the National Population Commission, Ministry of Health and Family Welfare, India’s population in 2011 was 121 crore, comprising approximately 246 million households. The decadal growth rate during 2001-2011 stood at 17%. This is estimated to have decreased to 12% during 2011-2021 and is likely to decline further to 9% during 2021- 2031. However, with the country’s population in 2030 estimated at 1,470 million, India will continue to be a major opportunity market from a demand perspective. The share of urban population in total population has been rising consistently and is expected to reach 35% by 2023 from 31% in 2011, spurring demand. India’s diverse economy encompasses traditional village farming, modern agriculture, handcrafts, a wide range of modern industries, and a multitude of services.  Slightly more than half of the work force is in agriculture, leading the government to articulate a rural economic development programmer that includes creating basic infrastructure to improve the lives of the rural poor and boost economic performance.

The government has relaxed controls on foreign trade and investment. Higher limits on foreign direct investment were permitted in a few key sectors, such as telecommunications. However, tariff spikes in sensitive categories, like agriculture and incremental progress on economic reforms still hinder foreign access to India’s vast and growing market.


India’s per capita GDP recorded a 5.46% CAGR over Fiscal 2015 to Fiscal 2020 on real basis, rising from approximately ₹ 83,000 to approximately ₹ 108,000. A pandemic-induced nationwide lockdown in the early part of Fiscal 2021 led to a decline in income and widespread temporary loss of jobs, pushing per capita GDP lower by 6.8% year-on-year, to approximately ₹ 101,000 in Fiscal 2021, back to Fiscal 2018 levels. On this low pandemic-impacted base, per capita GDP recorded an approximately 8% growth in Fiscal 2022, rising to ₹ 109,000, thus crossing the pre-Covid-19 level of Fiscal 2020. In Fiscal 2023, per capita GDP rose to an all-time high of ₹ 115,746 as the economy registered consecutive years of robust growth.

Strong growth combined with easy consumer credit, a real estate boom and fast-rising commodity prices fueled inflation concerns from mid-2006 to August 2008. Rising tax revenues and economic expansion helped the government make progress in reducing its fiscal deficit for three straight years before skyrocketing global commodity prices more than doubled the cost of government energy and fertilizer subsidies. The ballooning subsidies amidst slowing growth brought the return of a large fiscal deficit in 2008. In the long run, the huge growing population is fundamentally a social, economic and environmental problem.

The economy was badly affected during the second half of the year caused by a massive financial crisis triggered mainly due to the collapse of American Banks and Insurance companies. The liquidity constraints started showing and a result banks were reluctant to lend to any sector and more particularly to Micro Finance sectors. This has resulted in many of the Micro Finance Institutions finding it difficult to raise resources.

However, things became positive in the last quarter and with RBI pushing in for higher credit off take, India’s GDP bounced back to a respectable level of 7%.Due to the timely intervention by RBI, the economy has started looking up and banks are now looking at funding the Micro Finance Sector, though cautiously.

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