574

THEME THE CHARTERED ACCOUNTANT

Charting Pathways to Prosperity:

Financial & Tax Literacy for Inclusive
Development

life-altering. Catering to this

predicament, the Institute of
Chartered Accountants of
India (ICAI) has initiated a
drive, through its Group for
Promoting Financial & Tax
Literacy, that solely focuses
on disseminating essential
CA. Abhay Kumar CA. Umesh Ramnarayan
knowledge regarding
Chhajed Sharma
Member of the Institute Member of the Institute financial and tax literacy and
caters towards ICAI’s maxim
of being a true ‘Partner in
When trying to grasp the nuance of Financial and Tax Literacy, it is Nation-Building’. The Group
vital to understand that it all depends upon the ability of a person has established a website
to comprehend the concepts of Financial and Tax Literacy. With portal that effectively
proper guidance and knowledge, one can quickly hone those provides informative content
abilities to decipher the correct stance of financial literacy to make in 12 vernacular languages
viable financial decisions. Now, the question arises as to where to for ease of access to every
gain access to this pivotal information that has the potency to be citizen.

B
eing an academic
marvel, the present
education system of
the country is underway to
integrate financial literacy as a
vital subject in the curriculum.
To cater to the same purpose,
CBSE has included financial
literacy in its list of 33 added
subjects in the revised school
curriculums of India. But what
about those who have already
graduated from school? Better
yet, what about those people
who don’t even have access to
basic education? To propagate
financial literacy amongst those
people, benevolent thought
leaders and perspective-building
organizations must collaborate
to emphasize the importance
of imparting financial and tax
literacy. This monumental feat can
only be achieved if all of us do our
bit each day to teach someone
unaware of the vitality of financial
literacy.
Now that the urgency of
deliberating financial and tax
literacy has been established,
it is crucial to decipher what
financial literacy means.
Financial and Tax Literacy is
the development of a cognitive
understanding of financial
components to master the skills
of personal wealth management
with tools such as budgeting,
investing, taxation, etc.
Considering that the concepts
of budgeting, investing, and
taxation are slightly advanced
for laymen, it is pertinent to
start disseminating financial
knowledge right from the basics.
Savings and spending, bank
loans and Government schemes,
and digital payments are good
places to start with. These
concepts are used in the daily
routine of a citizen.

30 NOVEMBER 2023 www.icai.org


THE CHARTERED ACCOUNTANT
Financial Literacy
equips its pursuant
to prepare a customized
plan for retirement and
succession planning.
Amid the plethora of reasons
backing the vitality of financial
and tax literacy are the many
benefits that it concurs. Financial
and tax literacy streamlines
steadfast growth for the
individual as well as the economy
at large.
It commences with individual
financial management. Financial
and tax literacy emboldens
individuals to approach financial
matters in a responsible and
efficient manner. By imparting
pertinent fiscal knowledge,
financial and tax literacy enables
individuals to devise customized
solutions to their everyday
essentials in terms of managing
their finances.
Financial foresight counts as
one of the key advantages
that come with Financial & Tax
Literacy. It empowers individuals
for unforeseen circumstances
that may potentially hamper their
fiscal health. It equips folks to
efficiently handle uncertainties
such as unexpected illness,
accidents, natural disasters,
emergencies, unemployment,
etc. It may act as an aid to buffer
savings/assets to be utilized
during the need of the hour
or provide access to befitting
sources of insurance in order to
reduce financial risks.
Financial and tax literacy aids
one’s financial forethought along
the way. It can help individuals
decipher their short-term and
long-term fiscal needs and
plan their future course of
action in accordance with their
personalized requirements.
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With this pivotal knowledge, a
person can comprehend the
opportunity costs involved with
varied financial alternatives and
pick the right options befitting
their needs. Alongside this, it
facilitates the opportunity to
explore financial markets, and
investment ventures, and reap
tax benefits.
Financial & Tax Literacy amplifies
financial longevity, enabling them
to withstand any circumstances
that may arise. Fortifying the
inclusive stance of the financial
aspects inadvertently leads to
financial durability or financial
stability. Deploying financial
attributions adequately would
emplace a stable financial
system that incurs the potential
to withstand excessive debt,
and sustain sufficient liquidity/
solvency ratios, while complying
with prudential regulations. It
may also aid in foretelling any
potential financial crises and
establishing ways to combat
them.
The benefits don’t only restrict
to an individual’s development,
but they also leave a lasting
impact on the economy as well,
spearheading it to an economic
upswing. Akin to a ripple effect,
the amalgamation of financially
literate individuals transmutes
into financially responsible
citizens amassing to escalate
the financial equilibrium of
the nation. Each individual
contribution spearheads the
nation’s economy to become
financially forward. As the
financial aspects are dealt with
in a liable fashion, it leads to
an uprising economic upturn.
Continual investment of financial
assets in the right opportunities
abets the country’s economic
standpoint significantly.
One of the most plausible
advantages of financial literacy
is that it prepares you for a
575
THEME
financially secure future. Financial
Literacy equips its pursuant
to prepare a customized plan
for retirement and succession
planning. In order to grow one’s
finances gradually, investment
in mutual funds, systematic
investment plans, fixed deposits,
and interim deposits are some
of the most favourable options.
This accumulated wealth can
aid one’s retirement life and
henceforth succession planning.
Once a stronghold is established
on the basic concepts, one
can take the next step toward
financial integration. This concept
is a sporadic venture with the
potency to materialize upon
attaining an ample understanding
of essential financial ideations.
It refers to the phenomenon
wherein the financial markets
of neighbouring, regional,
and/or global economies are
closely linked. A few good
instances of this notion would
be cross-border capital flows
and domestic financial markets.
However, it is stringently
advisable to educate oneself
thoroughly before speculating
to venture into an investment in
these fiscal opportunities.
When we talk about financial
and tax literacy, usually, financial
literacy basks in the limelight,
leaving tax literacy lurking in
the shadows. However, tax
literacy is equally as important,
if not more. If a layman is asked
Financial and Tax
Literacy not only
educates the populace
about essential life-
saving knowledge
but also caters to
strengthening the
financial ecosystem
of the country.
NOVEMBER 2023 31
576
THEME
Financial
Inclusion refers
to ascertaining that
every individual and/
or business entity can
avail access to affordable
and fundamental
financial services, for
instance, banking,
insurance, savings,
and credit, regardless
of their income, or
orientation.
about the underlying concepts
of taxation and policies set
up by the Government, only a
handful would be able to answer.
This depicts the urgent need to
disseminate proper knowledge
about both financial as well as
tax literacy. Providing information
in an easily digestible format is
of utmost importance as that is
the only way to make the laymen
understand these advanced
concepts.
Financial and Tax Literacy not
only educates the populace
about essential life-saving
knowledge but also caters to
strengthening the financial
ecosystem of the country.
Even the Reserve Bank of
India (RBI), in the year 2020,
launched the 5Cs program. The
5Cs program encompasses
“Content, Capacity,
Community, Communication
and Collaboration” to promote
financial education under the
National Strategy on Financial
Education initiative. However,
conducive results are yet to be
achieved concerning educating
the populace about the impact
that financial and tax literacy can
have on their lives.
What was considered a heaping
challenge erstwhile, is now
32 NOVEMBER 2023
helming towards solution-
oriented problem solving. This
makes it evident that bolstering
dexterous financial prosperity
in students’ lives from the
get-go prepares them for a
financially sound future. This
in turn demonstrates that our
country beholds the prowess to
financially literate its masses.
Further prolonging the hope that
the disparity amongst inclusive
financial development for all
genders would one day come
to a halt. As a nation, we need
to recognize the potential of
financial inclusion for altering
the current fiscal standpoint
into an ever-evolving economic
landscape. The stepping stone
to emplace this stance would
be to educate and aware every
individual with the ability to
manage their fiscal affairs
adeptly.
Even in the 21st Century, fiscal
disparity is a persisting harsh
reality, especially in developing
nations. It is oddly ironic that
most of the homemakers, who
have the potential to make the
most out of financial operations,
are frequently deprived of this
transformative knowledge. Every
family functions differently,
hence, tailor-made financial
solutions need to be adopted.
With pervasive knowledge,
financial road-mapping becomes
an effortless task for a financially
literate homemaker.
Financial Inclusion refers to
ascertaining that every individual
and/or business entity can
avail access to affordable and
fundamental financial services,
for instance, banking, insurance,
savings, and credit, regardless of
their income, or orientation. With
the objective to foster economic
stability, decrease poverty, and
accredit the marginalized strata
of the population by allocating
essential tools to manage their
THE CHARTERED ACCOUNTANT
finances and partake in the
economic upswing.
Unfortunately, ample challenges
continually persist hampering
the promotion of global financial
inclusion. Approximately 24%
of the worldwide population
lacks access to rudimentary
financial tools such as accounts,
insurance, savings, etc. And
from the ones that do, only 29%
deposit their savings in financial
establishments. This problem
escalates even further for women
due to restrictive social norms,
and lack of financial literacy,
immensely increasing the gender
gap in facilitating financial tools.
In terms of business entities,
even if we consider MSMEs,
things only get dire. Small-scale
and large-scale enterprises in
developing countries are beset
increasing barriers to financial aid
by up to 30%.
The National Centre for Financial
Education’s (NCFE) Financial
Literacy and Inclusion Survey
held in 2019 concludes that the
overall financial literacy level of
the country measures up to only
27%. However, according to a
statement made by the Reserve
Bank of India (RBI) during the
last month, the value stated in
the Financial Inclusion Index (FI
Index) for March 2023 amounts
to 60.1 as opposed to 56.4
during the same time last year. It
was indisputably acclaimed that
even without any ‘base year’, the
FI Index reflects the concerted
efforts of all stakeholders toward
bestowing financial inclusion.
With the objective of minimizing
the financial pitfalls upraised
by financial illiteracy and
contributing to the Government’s
initiatives catering to educating
the populace, the ICAI continually
initiates innovative exertions.
Since its initiation, the Group
for Promoting Financial & Tax
Literacy has earnestly worked
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THE CHARTERED ACCOUNTANT
towards the efficient propagation
of financial and tax literacy. The
Group has tapped a significant
number of mediums to attain
this purpose. A radio campaign
disseminating knowledge with
coverage of content pertaining
to financial and tax literacy
in English, Hindi, and various
other vernacular languages to
reach a wider stratum of masses
has been originated by the
Group. This effort has been well
appreciated by one and all. The
Group continues to strive and aid
in ICAI’s attempts to ascend as a
true “Partner in nation-building”.
Pondering over the solutions to
overcome the aforementioned
challenges, a plethora of
innovative initiatives are required
to be implemented by the
Government, the ICAI and
citizens alike. A 3-point strategy
can be enacted to forge a
sturdy path leading to financial
inclusion.
The first step would be to
substantiate the financial
ecosystem. The best way to
accomplish this is by nurturing
Public-Private-Partnerships
(PPP), by inculcating financial
literacy with the incorporation
of capacity-building programs.
It can further be reinforced
with providing gender-inclusive
financial services.
The second step inculcates
diversifying financial services.
Beginning with extending
insurance penetration further 7%
of GDP. To the accumulation of
agriculture, rural, and migrant
sections of the society in the
financial inclusion spectrum.
And decreasing the cost of
capital issued to financial
institutions. To further introduce
inventive distribution channels
to homogenize cross-border
payments.
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The third step would be
a rigorous emphasis on
consumer protection. It can
be achieved by emplacing a
systematic arrangement to
cater to consumer protection.
Implementing the said system
efficiently and innovating it
in due course of time would
further invigorate the successful
implementation of this crucial
step. It can further be vitalized
by strengthening the consumer’s
trust in digital financial services.
To deploy this strategy into
action, the Government of India
continues to develop and put
forth innovative programs to
incentivize economic security
and literacy for women. An
extraordinary example of these
initiatives is the Pradhan Mantri
Jan Dhan Yojana (PMJDY). This
program signifies an exceptional
step taken by the Government
to advance the level of financial
inclusion in the country.
There is a dire need to instigate
customized financial literacy
programs that cater to people
residing in Tier 2 and Tier 3
regions. The people in these
regions face unique challenges
that need to be addressed in
accordance with tailor-made
solutions for each individual.
Alongside this, providing
essential financial services
for people bechances the
heightened probability of
increasing financial literacy.
Persisting in the crumpled
edges of a sporadically thriving
economy are many of the
marginalized sections of society
who are in as much need of
financial literacy as any other
citizen. Joining forces with local
Non-Governmental Organizations
(NGOs) establishing self-help
groups, community-based
organizations, and holding
workshops, can be a pivotal step
in the right direction. It not only
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THEME
stimulates financial literacy in
their lives but also provides them
with a sense of community and
belonging.
To reinforce the notion of
community and belonging, ICAI’s
Group for Promoting Financial
and Tax Literacy has time and
again brought the CA community
together to join forces and
collaborate to direct the pathway
to raise financial awareness.
Last year, the Group instated
the Sone ki Chidiya initiative,
conjoining all the CAs to take an
oath to raise financial awareness
amongst the varied strata of
society. Vittiyagyan Sankalp, the
honorary successor of the Sone
ki Chidiya initiative accumulated
the participating CA members
and students to assemble a
cohort of accomplished CAs and
utilize their knowledge effectively
to impart essential knowledge.
The ICAI constantly strives
to contribute to the financial
furtherance of the nation with
consistent tenacious maneuvers
with a resolution to serve the
financial fortitude of the nation.
The goal must be to make
people realize how to make
their buck work for them to
expand their wealth rather than
having it sit idle in the corners of
lockers installed in their homes.
This, in turn, will transpire
savings enough to plan a sound
retirement or succession plan.
It is crucial to realize that saving
and investing can start at any
age. There’s no perfect time to
start learning how to invest your
money and expand your wealth.
So, it’s never too late to learn.
Your financially adept future
awaits you.

Authors may be reached at
abhay.chhajed@icai.in,
fcaumeshsharma@gmail.com and
eboard@icai.in
NOVEMBER 2023 33