Microfinance is not a traditional part of formal financial system, it plays a crucial role in addressing poverty and fostering social development, which especially uplifts the status of women in our country thus they can become self- reliance. This Research paper narrates the theoretical framework of microfinance institutions in India. This research study made an attempt to pinpoint the significance of microfinance in the development of the rural area. Through an analysis of microfinance schemes, this research paper seeks to shed light on their contribution to rural development, and effectiveness of microfinance in promoting economic growth. This research paper also concludes that weaker section of Indian economy which used dreadful methods for earning credits through lending. So, microfinance programmes plays a significant role while focusing on the need of the poor people and improve their standard of living which contributes in economic growth and overall inclusiveness in Indian Economy.