Starting Early: Analysing the Impact of Literacy Rates on Financial Literacy Rates in India

Abstract

This paper aims to analyse the state-wise impact of literacy rates on the financial literacy rates in India. The OECD defines financial education as, “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.” Financial literacy has been gaining popularity more rapidly than ever in the recent past, amid both developing and developed countries alike. The objective of this paper is to the relationship between literacy rates on the financial literacy rates in India. The methodology employed is a statistical analysis of secondary data collected. The findings show that there exists a positive relationship between literacy levels and financial literacy levels. It is not a particularly strong relationship, though statistically significant. The paper concludes with recommendations and suggestions that could help improve financial literacy rates in India.

Keywords: Literacy Rate, Financial Literacy, Financial Literacy Rate, India

JEL Classification: I22, I24, I25