From Wealth Creation To Wealth Protection: How Financially Planned Is India?

By Dante De Gori, CEO, FPSB International (FPSB Ltd.)

India is a fast-growing economy and has witnessed an increase in disposable income specially in the middle class. However, when it comes to financial planning for individual households, a large population is still not equipped to make informed choices. So, how financially planned is India?

While awareness around financial planning is growing, the adoption of structured and professional advice remains limited. The gap between wealth creation and financial readiness highlights the need for stronger systematic financial planning from the ground up – an essential step towards building a Viksit Bharat by 2047.

The Current State of Financial Planning in India

Despite remarkable economic progress in the past decade, India's financial planning ecosystem is still nascent. According to the National Centre for Financial Education (NCFE), only 27 per cent of Indian adults meet basic financial literacy standards: this is substantially below the global average of 42 per cent. This lack of financial knowledge is even more striking among millennials, where only 19 per cent have sufficient financial literacy, despite a high level of self-confidence in their financial capabilities. This lack of financial knowledge, versus self-perceived financial education, presents a significant threat to their financial sustainability and wealth accumulation.

While India benefits from a large, young population and rising income levels, these advantages are often underutilised due to the widespread lack of financial awareness, especially in rural and semi-urban areas.

Why Financial Planning Awareness Matters

Not having a financial plan can leave individuals less prepared to manage their finances effectively. This can lead to challenges such as increased debt or insufficient savings for retirement and may also have broader social impacts. Many remain financially vulnerable because a significant amount of household debt is not for the purposes of long-term investment, but rather for consumption purposes.

The Reserve Bank of India's Stability Report suggests that non-housing retail loans now make up 55 per cent of total household debt, above a mere 29 per cent where home loans make up the rest. This is an indicator that, despite reasonable levels of debt overall, a significant number of households face large amounts of household debt for the purposes of consumption, not productive investment. Households without adequate savings or financial planning are at a greater risk of financial emergencies. As a result, this increases their financial vulnerability and leads them to become trapped in debt.

Financial planning is not just a matter of being able to save for emergencies - it is also about being prudent with your investment decisions for the purpose of wealth generation. Although incomes are increasing, many Indian households miss opportunities to invest in high-return financial pathways, largely because they lack sufficient financial acumen.

Closing the Knowledge Gap

Bridging this gap requires a multi-pronged approach. Financial education must be integrated into school curricula to ensure future generations are equipped to manage their finances. While initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY) and Digital India have expanded access to digital financial services, comprehensive financial education remains an obstacle. Public and private sector organisations must collaborate to create scalable programs that reach the underserved, ensuring that financial knowledge is not limited to urban centres.

Financial Planning and India's Vision for 2047

India's goal of being a developed nation by the year 2047 cannot be separated from the financial security of its citizens. Financial security on an individual level is as important as economic growth at a larger platform. A culture of financial planning could enable India to build a foundation of financial security for individuals as well as the economy as a whole. India has the ability to unlock the potential of a growing population with the right education and resources to be a financially sustainable nation by 2047.

(Disclaimer: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)