By Sourav Shekhar
New Delhi, Jan 13 ( .) When finance is aligned with real economic activities, it becomes a strong catalyst for growth rather than a mere flow of credit, Chief Economic Adviser V. Anantha Nageswaran said on Tuesday, stressing that inclusive finance is essential for raising incomes and building a resilient economy.
Nageswaran said finance should be viewed as a complement to economic growth, supporting productive work and entrepreneurship. He noted that when financial systems are designed to match the rhythm of work, income cycles and business realities, people tend to behave more responsibly. This alignment, he said, improves repayment discipline, strengthens trust in the system and ensures that finance supports value creation.
Referring to the challenges at the grassroots level, the CEA said credit constraints continue to restrict entrepreneurs, particularly small and micro enterprises. However, he cautioned against viewing credit as a standalone solution. “Credit alone cannot produce independence,” he said, adding that access to finance must be combined with skills, market access and supportive institutions to create lasting economic empowerment.
Nageswaran underlined the role of inclusive finance institutions as vital intermediaries between capital markets and small entrepreneurs. These institutions help mobilise capital from formal markets and channel it to productive activities at the bottom of the economic pyramid, enabling entrepreneurs who are otherwise excluded from mainstream finance to participate in growth.
He also emphasised that financial literacy must be meaningful and contextual. According to him, a financially literate entrepreneur is not just one who understands loans, but also someone who knows when to expand, when to pause and when not to take financial risks. However, he added that literacy by itself is not enough. “Literacy needs opportunity,” he said, noting that people become financially capable only when they are connected to markets that allow them to apply their knowledge.
Highlighting structural changes underway in the economy, the CEA pointed to the surge in digital adoption, describing it as a crucial bridge from informality to formality. Digital platforms, he said, are enabling small entrepreneurs to access payments, credit and markets more easily, thereby integrating them into the formal economic system.
Nageswaran also made a strong case for embedding inclusive finance within healthcare and social security frameworks, arguing that financial vulnerability often arises from health shocks and lack of social protection. Integrating finance with these sectors can help stabilise incomes and improve long-term productivity.
Importantly, he stressed that the most powerful inclusive finance tool is not loans but timely payments to micro-entrepreneurs.
Ensuring prompt payment for goods and services, he said, strengthens cash flows, reduces dependence on debt and allows small businesses to function with dignity and stability.
. SAS PRP