Close to 76% Indian adults do not adequately understand key financial concepts, found a global survey conducted by Standard & Poor’s Financial Services LLC. The S&P’s Ratings Services Global Financial Literacy Survey found that this number is lower than the worldwide average of financial literacy, but it is roughly in line with other BRICS (Brazil, Russia, India, China and South Africa) and South Asian nations. According to the survey, three-quarters of Asian adults and two-thirds of adults worldwide are not financially literate.
Countries with the highest financial literacy rates include Australia, Canada, Denmark, Finland, Germany, Israel, the Netherlands, Norway, Sweden, and the UK, where about 65% or more of adults are financially literate. South Asia is home to countries with some of the lowest financial literacy scores, where only a quarter of adults—or fewer—are financially literate. Singapore has the highest percentage of financially literate adults (59%) in Asia.
The survey was conducted in 2014 by Gallup (an American research-based, global performance-management consulting company) as part of the Gallup World Poll while the analytical support was provided by researchers at the World Bank and the Global Financial Literacy Excellence Centre at the George Washington University. For the survey, interviews of more than 150,000 adults across over 140 countries were conducted. Individuals were tested on their knowledge of four basic financial concepts: numeracy, risk diversification, inflation, and compound interest (savings and debt).
S&P said, “Only 14% of Indian adults correctly answered the question on risk diversification. Conversely, 56% answered the inflation question correctly. About 39% of adults, who have a formal loan, are financially literate, while more than a quarter (27%) of formal borrowers was found to be not financially literate. Only about half of the participants (51%) understood compound interest.”