Assessing the Role of Direct Benefit Transfer Schemes in Promoting Financial Inclusion: Evidence from Himachal Pradesh, India

Financial inclusion is widely seen as a major contributor to inclusive economic growth, poverty alleviation, and household resilience, especially in rapidly developing digital economies. Direct Benefit Transfer (DBT) in India, introduced through the Jan Dhan-Aadhaar-Mobile (JAM) program, has radically transformed welfare delivery by directly depositing government benefits into beneficiaries' bank accounts. Whereas national data indicate substantial growth in access to finance, there have been few empirical studies of the behavioural implications of participating in DBT at the regional level. This paper assesses the importance of DBT schemes in promoting financial inclusion for households in Himachal Pradesh, India. A composite Financial Inclusion Index is built from primary survey data collected in 2023-24, covering account ownership, account usage, digital transaction adoption, and DBT receipt. Descriptive statistics, Chi-square tests, binary logistic regression, and ANOVA at the district-level are used in the empirical analysis. The findings indicate widespread access to finance: 91.2% of participants have bank accounts, and 83% report using them regularly. DBT participation is significantly related to account activity and the adoption of digital payments, with beneficiaries more likely to be financially included than twice as often. Nevertheless, the different levels at the district level show that inclusion results are mediated by infrastructure and digital network access. The results indicate that DBT is a structural driver of behavioural financial inclusion, but long-term gains require additional investment in digital infrastructure and financial literacy.