Financial literacy requires genuine efforts
The survey, which was quoted in the NSE bulletin, was conducted in 2019. The study states that there are significant variations in the financial literacy levels of urban and rural India, glaring disparities in the states and regions, and significant differences between men and women.
The worrying factor is that the boom in the financial markets happened after 2019 and in the post-COVID-19 world. Demat and trading accounts and mutual fund folios surged to record levels. All of that happened on a weak and skewed base of financial literacy. That explains the country's 7-8% penetration of financial services products. All of that is despite a dramatic surge in the effort to increase investor awareness.
Assertive efforts
Financial literacy programmes cover basic topics across financial products. They probably touch upon the topics of financial advice and asset allocation. However, learning about these things is not a one-off exercise. It is a constant learning curve. On top of that, the literacy push lacks assertiveness. For example, there is no reason for anyone to indulge in day-trading or derivatives without adequate knowledge. When regulators like Sebi publish studies about most traders losing money, many social media champions swing into action to tell people that, however, financial literacy clashes with business interests. A stock exchange or a broker will not overtly discourage people from trading in risky instruments. Those high trading volumes generate income for the entire stock market ecosystem. Similarly, mutual funds often balance their act of pushing passive and active mutual fund schemes. The focus is getting investors to buy into schemes that provide a better fund management fee. An index or an exchange-traded fund carries a minimal fund management fee.
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