Financial literacy in India is still not something that is very much talked about even though it should be. Financial Literacy is the ability to use skills and knowledge to take effective and informed money-management decisions. From it simply being an alien term to being one of the most focused terms by the National think-tanks, this concept has come a very long way. It is one of the critical areas that our government is trying to improve in by making people more aware and informed. For a country like India, where people are already finding concepts of finance beyond their comprehension, this plays a bigger role as it is considered important for the promotion of financial inclusion and ultimately financial stability. Financial Inclusion was one of the goals of the current government in the previous Five-year Plan emphasized by the Prime Minister in the year 2014. Several Schemes were launched to make it successful yet it leaves a lot of scope of improvement as the impact isn’t at desired levels.
- Where are we currently?
Financial literacy in India is still not a priority. India is home to 17.5% of the world’s population but nearly 76% of its adult population does not understand even the basic financial concepts despite having a larger chunk being young and falling in the age group of 15-35 years old. Financial illiteracy increases the cost of financial security and thus reduces prosperity. An example of this is the fact that most people resort to investing more in physical assets and short-term instruments, which conflicts with the greater need for long-term investments, both for households to meet their life stage goals and for meeting the country’s capital requirements for infrastructure.
- Myths to be busted
One big myth in our country is that the rich and educated adults are financially literate as well which is so not true as there has been seen various cases proving that having money does not ensure you also know how to make efficient and informed money management decisions. Another myth is that financial literacy is more important for adults. Children should be educated about all these basic things in the school only gradually so that they do not learn about it from any other not-so-healthy means. Research says that they should be taught about healthy financial habits from the age of 10 only and be encouraged to ask all kinds of doubts from their teachers and parents and do not take any information from other people. It is important to note that empirical evidence points to the fact that digital efforts like video clips, short films and interactive quizzes on financial education have had a better impact than the traditional medium. Use of digital media is expected to increase with government initiatives such as Digital India.
- Digitisation’s role so far
With the advent of of digital wallets, Universal Payments Interface (UPI) and new-age commercial and payments our economy is very close to becoming cash-less. India is targeting one billion dollar worth digital transaction everyday which we are getting close to each day. The push to increase usage of mobiles for payments is significant, as India is already the world’s second biggest smartphone market with over 220 million smartphone users. Huge promotion of online payments happened soon after the Demonetization with a goal to make India cash-less economy. Companies like Paytm, Google Pay, BHIM UPI, PhonePe became very popular and their business escalated as people started using these apps for all their day-to-day transactions. In India, we do not just need to educate those who are completely unaware and are not good at using technology but also to our tech-savvy generation about all the financial tools they can use to safeguard and grow their money.
The younger generation is economically more active compared to their previous generation but are also more fragile in dealing with personal finances. This generation even after having all kinds of knowledge do not take necessary action on time and this laid-back attitude towards their personal finances make it even more difficult for them to prove that they are financially literate. A financially literate person would not commit the kind of mistakes that they do. There are so many asset classes that they are totally unaware of where they can invest and grow their money according to their financial goals and risk taking ability. Thus, Financial Literacy in India is as important as any other type of education as even the illiterates have to deal with money and it’s affairs.