Dr Krishna Kumar Vepakomma
It is widely acknowledged that financial literacy is a critical aspect of achieving financial inclusion in India, as a large segment of the population lacks basic financial knowledge. Poor financial education leads to inadequate financial decision-making and a lack of trust in financial institutions, hindering financial inclusion. India’s financial literacy rate is only 24%, compared to the global average of 35%, while developed countries like the US and Canada have rates of 57% and 68%, respectively. To bridge the gap in financial literacy between India and other countries, financial education needs to be integrated into India’s education system, providing young people with the knowledge and skills to develop good money habits early in life. Although India is home to 20% of the world’s population, only 76% of its adult population is familiar with basic financial concepts. Shockingly, only 5.5% of schools in India offer financial education courses.
The government has established the National Centre for Financial Education (NCFE) to promote financial literacy and create awareness of financial products and services. Private sector companies, including banks and financial institutions, have also launched financial literacy programs that provide workshops, seminars, and online courses to educate people about budgeting, saving, investing, and credit management. With the rise of digital entrepreneurship and cryptocurrency, financial literacy in school students has become increasingly important. The pandemic further highlighted the significance of financial literacy as people were forced to manage their finances.Regulatory bodies in India, such as RBI, SEBI, IRDAI, and PFRDA, prioritize improving financial literacy among small businesses. This is particularly important as small businesses form the backbone of the Indian economy. Financially literate small business owners can make informed decisions about financing, investing, and managing cash flow, leading to better financial outcomes.While these initiatives are commendable, improving financial literacy levels in India requires a long-term effort.
Raising financial literacy levels can reduce poverty and boost economic growth, which is essential for the country’s development. However, achieving this goal requires individuals to take the initiative to educate themselves about financial management and make informed financial decisions that can help them achieve their financial goals. Incorporating financial education into the education system and making it available to adults in India is crucial to ensure the long-term success of financial literacy initiatives.With sustained efforts from both the government and the private sector, the financial literacy rate in India can be improved, leading to greater financial inclusion and economic growth.
Dr Krishna Kumar Vepakomma