This paper studies the impact of group-based microfinance interventions on the income of rural households in an Indian state. A stratified random sampling technique was employed to select households from four districts in the state of Orissa. The sample households were further classified into two groups according to their livelihood patterns: agriculture & allied activity and micro-enterprise & trading activity. A comparison between the target group of households participating in microfinance programs and a control group was carried out by a univariate z-test and by multiple regression analysis. The inequality in income distribution was analyzed in terms of the Gini coefficient and the Lorenz curve. The study provides strong evidence of the positive effect of microfinance programs on the income of the participating households.