Financial literacy index: A data landmine or a true lifeline?

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Many years ago Tagore pointed out that as a nation we often begin something with aplomb but don’t push it to its logical end. Beginning a scheme and allowing it to lose momentum midway is something that we frequently do. The financial inclusion index that Reserve Bank unveiled on August 17 is an important measurement that would help the government to monitor the progress on this front and modify the programme accordingly.

Financial inclusion is one of the thrust areas of the government and aims at involving all adults in the system for the financial well being of everyone and by extension, of every family at the bottom of the pyramid. The opening of the Jan-Dhan account – a savings account for every individual – is a necessary but not sufficient condition for financial inclusion which concerns access to services of the post office, pension, insurance, and investment instruments to ensure a secure future for every individual.

Just like bank accounts, pension and insurance at cheap rates are a crucial part of financial inclusion. The numbers are growing over the past few years. Insurance has especially got a fillip after the pandemic that has driven home the need for insuring the future of near and dear ones. The economic advisory council to the PM has also recommended raising the old-age pension given to senior citizens of the BPL category.

The most significant part of RBI’s index is that it would go beyond mere number crunching like enrolment for services. As every statistician knows, numbers can be cleverly manipulated to suit a variety of perspectives and predetermined outcomes. The index would also go into the quality aspect of services that have been assigned a 20% weightage. Under the quality parameter, the index would attempt to capture the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, inequalities and deficiencies in services. It’s a long journey and the index would help in measuring the steps till the goal is reached.