India is among the world's most efficient financial markets in
terms of technology, regulation and systems. It also has one of
the highest savings rate in the world—the gross
household savings rate, which averaged 19% of Gross Domestic Product
(GDP) between 1996-97 and 1999-2000, increased to about 23% in
2003-04 and has been growing ever since.
Savings, when pooled into a financial product, becomes
an investment. Over the last few years, India's investment rate,
which was earlier less than the savings rate, has now surpassed it.
From 2001-02 to 2004-05, the savings rate was higher than the
investment rate. However, from the fiscal year 2005-06, the trend reversed
and the investment rate has outperformed the savings rate. This
is depicted in Graph 1.
Financial literacy is the process by which investors improve
their understanding of financial markets, its products, concepts
and risks. Financial literacy is the ability to understand
finance sufficiently to make appropriate decisions regarding one's
personal finances. Through information and objective advice,
investors develop the skills and confidence to become more aware of
the financial risks and opportunities and make informed choices
to improve their financial position.
Financial planning varies, depending on the investors' age
and availability of funds. It helps in managing one's resources
and controlling undue expenses. Financial planning is the process
of meeting life goals through the proper management of finances.
It requires implementation of coordinated plans for the
achievement of personal objectives. It requires direction to financial
decisions, giving them meaning. Hence, for an individual, a proper plan
of action should be prepared according to which investments and
other decisions can be taken. This can be done with proper
personal financial planning. |
