The news last week was dominated by the launch of the government’s ambitious new financial inclusion plan, the Pradhan Mantri Jan Dhan Yojana, or PMJDY. The government intends to add 75 million new bank accounts by January 2015. This is not, in itself, too difficult a task when approached in “mission mode”; as this newspaper has pointed out, the last government added 61 million new bank accounts last financial year. The problem is to ensure that the benefits of the bank accounts are understood. Only then will India see the sort of retention and frequent usage of these accounts that will ensure that inclusion is actually happening. The number of new accounts is the wrong metric, perhaps, for a government to target. It should instead target continuing transactions, or the number of active accounts. Only when the target of PMJDY, the average “unbanked” man and woman, sees a benefit to being a part of the banking system, will inclusion actually take off.
That’s why, in fact, another piece of news from last week may hold the key to the success of financial inclusion. The National Stock Exchange or NSE, it has been reported, will partner with the government of the state of Himachal Pradesh to design a financial literacy curriculum for the hill state’s high school students. The idea, apparently, is to ensure that students in Class IX and X understand how and why they should manage their savings – with curricular sections devoted to “income, expenses, importance of savings, banking, basics of financial planning, investing, money management and setting financial goals.” This is a worthy enterprise. The NSE and the Himachal Pradesh government deserve credit, also, for designing a series of workshops for the state’s teachers, to help them with the material so that they can pass it on better to their students. This effort needs study. If it works, it needs to be replicated widely.
“Financial literacy” is an overused phrase. Too often, it is a catch-all – a way of ensuring that regulators meant to protect consumers and investors can instead pass the onus of their job to the consumers and investors themselves. PMJDY also promises financial literacy – but, it is clear, as an afterthought. Financial literacy should be an aim in itself. One will not succeed without the other. And the delivery mechanism for inclusion and literacy cannot be shared; that leads to a muddling of priorities, and skewed incentives. This is why using the school system is a commendable idea.
Indeed, there is considerable benefit to such ideas from another perspective, too. And that’s that Indian school education does not focus, enough, on turning out numerate citizens. Certainly, the social sciences are important; and a desire to become an engineer ensures that science subjects and pure mathematics are not ignored by students. But economics and statistics – the most crucial way for students to become good and informed citizens in increasingly data-heavy societies – are rarely given the same emphasis. This needs to change. And it would help if the inputs that drove curricular revision came, in fact, from the bodies that eventually use and deploy such skills. Again, that’s why the National Stock Exchange may do better in designing a financial-literacy curriculum than many others.
Both from the point of view of turning out more aware citizens and from that of creating more employable young people, therefore, a turn towards greater numeracy, and not just literacy, is crucial. The tricks behind statistical inference, in addition, will allow young people to more rationally address much of what they are told by parents, by their government, and by their peers. And teaching them how to be better savers will help the economy in many different ways. The experiment started by the Himachal Pradesh government and NSE deserves careful watching.