Dr. Harsh Purohit, CFPTRW, Professor and Dean, FMS-WISDOM, Banasthali Vidyapith, Rajasthan
Financial Literacy (FL) in India is considered abysmally lower in Asia-Pacific with the scores improving very slightly as per MasterCard studies. The recent survey by NCFE, Government of India, based on the OECD 2013 framework portrays an average picture of FL in India. However the crucial question is the framework adopted in judging the FL. The most popular definition of FL by OECD is that FL is a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing while the NFEC USA believes that FL is possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.
A study conducted at llM, Ahmedabad by Agarwalla, Barua and others also considered the OECD definition as the most suitable for examining FL in India. Recently another doctoral research work carried by Jariwala, a bright researcher, expressed disappointment over the lower FL in the Gujarat state. Her view is that financial literacy is concerned with the understanding of basic financial concepts, principles, skills and ability to understand key financial products, to make good financial choices. The first doctoral research in FL in Indian context conducted by Lokanath Mishra in my supervision at Banasthali Vidyapith, the largest residential university for women’s education in the world, also discussed about the lower FL among the Indian middle class. In view of lower FL, the RBI, NISM, SEBI, Banks, NGO, NABARD etc. have taken several initiatives. Bank of America, Icetrail Logistics, Banasthali Alumna etc. have supported CFPTRW, the Financial Literacy project at Banasthali Vidyapith.
From the above reviews it is evident that we have ironically followed that western model to arrive at the FL framework in India and perhaps kept studying FL without giving deeper thought. On examining the history of our glorious and the most elegant country of the world, India, the question arises, should we not strategically look at and alternate definition of FL that captures its essence in the Indian context.
It is worth mentioning that contrary to the popular view the first concept of financial literacy has in fact come from India. For instance some of the ancient Indian text shlok, “Idmev hi pandityam, chaturyaidmev hi, idmev hi subuddhitam, ayadalpatro vyayah” (emphasizing on keeping the expenses lower & income higher) and “Yasyanasti sawyam pragya, shastram tasya karoti kim, Lochnabhyam vihinasya darpanam kim karishyati” (signaling relevance of wisdom over the literature) and “Yauunam dhana-sanpattih, prabhut wamavvekith, ekaikampyanathaya kimu yatra chatushayam”, (showcasing that excess of wealth leads to destruction) and “Na chorharya, no cha cha rajharyan, bhatrubhajyan, no cha bharkari, vyaye krite vardhate eva nityam, vidyadhanam sarvadhan pradhanem” (emphasizing that knowledge is the biggest wealth) and “Ya devi sarva bhooteshu Lakshmi roopena sansthitha, namastasyai namastasyai namastayai namo namaha” (showing that the devi abides in all beings in form of good fortune). Furthermore many stories have also emphasized the prominence of serving others as the critical factor for wealth accumulation for instance the several teachings by Bhagwan Krishn to Arjun mentioned in the Mahabharata.
TOWARDS A NEW DEFINITION OF FINANCIAL LITERACY:
In view of leanings from our ancient texts it is clear that purpose of every human being is defined as per the Purusharth, with balance, complexity, richness, opportunities and moderation acting as the variables for attaining the ultimate spiritual path. I would therefore like to emphasize that in Indian context, Financial literacy can be defined as a small subset of Purusharth which though cannot be understood in isolation yet it deals with the financial knowledge, behavior, attitude, approach, choice pattern, emotions, mindset and lifestyle keeping in view that Moksh (oneness with God) and not the material wealth is the top priority, for overall happiness of self, family, society, nation, world and the universe. This is the first definition of Financial Literacy in Indian context and can be understood in the following manner:
Small subset of Purusharth: Purusharth means objectives of a human being irrespective of the gender comprising 4 aspects, the first is Dharm which means obligatory duty of a person as stated in Vedas , while the second is Arth reflects the joy of material wealth for benefit of everyone around, the third is Kaam that pertains to desire, while the fourth and the most prominent is Moksh which refers to oneness with God. Thus FL seems to be a part of the Kaam and the Arth, however it would be irrational to think so and rather it has a deep connectivity with Dharm, with the ultimate objective of attaining the Moksh.
Cannot be understood in lsolation: As there is a direct connectivity of FL with Arth and Kaam, we may be rationally tempted to treat it as a part of Arth and Kaam, however as all the three subsets of Purusharth are ultimately directed towards attaining the Moksh, FL can never be comprehensively understood in isolation.
Financial knowledge, attitude & behaviour: As explained by the well accepted viewpoints of experts, OECD definition etc.
Approach: The approach may comprise several aspects like Motivation following the ‘Basket of needs’ advocated by Indian management expert, Prof. Subhash Sharma rather than ‘Hierarchy of needs’ prescribed by Maslow; Room for ethics emanating from ‘How to Earn’ (Shubh-Labh or Holy-Profit), ‘Managing Expenses’, ‘How to Donate’ (Regular, even if less) and Accumulation of wealth (primarily for the society, but working as a custodian for accumulated wealth following the Dharm path and remembering that in general one should accumulate lesser wealth).
Choice Pattern: Refers to the way in which the suitable alternative is chosen after self analysis, consulting family members and the expert, but assigning top priority to the agya (order) by the Guru (Holistic Teacher & Learning Facilitator).
Emotions: Honouring money as the Devi Mata Lakshmi, (Goddess Lakshmi, described in Indian Texts) and donating without thinking about publicity (and in fact in a selfless manner) are the two unique ways to describe this term.
Mindset: Determined by the purity (Shudhhta) of thought and liberation from Kaam (desires), Krodh (Anga), Mad (Pride), Lobh (Greed) and Bhay (Fear).
Lifestyle: Keeping oneself detached, which Mahatma Gandhi described as being desire-less except for greed to serve others.
Moksh and not the material wealth is the top priority: Immaterial of the wealth, one can live only till the defined time while the wealth built over the years would not go along with one, is a globally accepted fact. Hence the material wealth cannot be the top priority. Moksh (oneness with the God) has to be the top priority which is a unique opportunity that one gets with the lucky birth as a human being.
Overall happiness of everyone: One can never be happy if others are sad, and therefore FL individual strives to extend all possible help and kindness to all creatures of the Universe. The tern universe is used as ancient Indian texts depict life at planets and lok other than the Earth as well.
This new definition is not just applicable in Indian context but can be researched to generalized for rest of the world also. Only the Indian approach to FL can help in attaining the wisdom with support from several well known phrases and shlok like ‘Avat to harshe nahi, man me nahi sneh, Tulsi wahan na jaiye, kanchan barse meh’ and ‘Pahla sukh nirogi kaya, dooja sukh, ghar me ho maya’. Furthermore most of the time people know the underlying principles of managing money; still they behave different from convention. The west calls it an action of Greed and Fear (i.e. the negative). However the Indian wisdom teaches that this may be due to the intuitive approach from the investor as well.
MEASURING THE LEVEL
The next question comes that how should we judge financial literacy in Indian context? In the backdrop of above discussions, I suggest the following new sapt-prashn on a five point likert scale, judging the extent to which an individual agrees to:
Should money be earned from any means for meeting needs of self, society and the nation?
Should one take money management decision after self analysis, consulting family members and experts, yet assigning top consideration to the Guru Agya?
Should one immediately forget one’s kind acts of donation?
Should money management be undertaken excluding Kaam, Krodh, Mad, Lobh and Bhay form the mindset?
Should one live very lavishly if one has accumulated huge wealth?
Should material wealth be assigned the top priority in life?
Should family, society and the world have right in suitable proportion on the income and wealth of an individual?
In addition from the known issues about the FL, some more statements can be used that are as under:
Should an individual stock preferred over a mutual fund in view of the return?
Would wealth of and individual get affected if return on investment is lower than the inflation rate?
Would it be fair to say that a sum of Rs. 100 growing at 8% per annum would be more than Rs. 124 after 5 years of time?
(The last 3 questions are adapted based on Mitchell and Lusardi framework)
You have been actively involved in your money management decisions.
You are very acquainted with all the following statements, ‘Tax planning should not be the first priority is money management’, ‘Mutual funds in long run would outperform FD’ and ‘SEBI, RBI, consumer court, Banking ombudsman etc. can be approached in case of dissatisfaction or fraud expectation on part of financial service provider’.
You are very well acquainted with the terms IPO, ETF, diversified mutual fund, Term insurance plan and PPF.
You have been well versed with budgeting, recording and documentation of transactions, and usage of technology in money management.
The first seven out of the above fourteen questions have never been given thought by the researchers on FL and are also intuitive in nature compared to the rest seven which are more rational in nature. Combining reasoning and intuition is wisdom, as advocated by Prof. Subhash Sharma in 1996. The innovative frameworks illustrated in KPMG and RICH models by Prof. Sharma are also extremely useful in developing new perspectives. Beyond doubt any new study in view of these frameworks is very likely to bring out a different picture of state of FL in the relevant region of study. What this means for India is that there is no need to feel disappointed at the lower level of FL reported for India by the world but look towards developing a new Indian model and framework to ascertain FL not just for India but also for rest of the world. It would be interesting to compare the global FL levels in view of the new framework and this would be yet another gift from India to the world.
Agarwalla, Barua, Jacob, Varma (2012), Financial Literacy among Working Young in Urban India, accessed from the following link, http://www.iimahd.ernet.in/fls/fls12/youngemployessandretired2012.pdf, on 13 July 2015
Banasthali Vidyapith, CFPTRW Working paper series 2014 onward, on Financial Literacy by Purohit H, Dwivedi M, Mehta D, Mishra L, Sharma P, Tyagi P, Rohella M, and Arora A
Jariwala, H. (2013). To study the level of financial literacy and its impact on investment decision – an in-depth analysis of investors in Gujarat state, Unpublished Ph.D Thesis, Ganpat University.
Mishra, L. (2011). A study of Financial Planning Awareness, Education and Advisory from an Indian Perspective with Special Reference to the Educated Middle Class. Unpublished Ph.D Thesis, Banasthali Vidyapith
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