The standard of financial literacy in the Indian retail investor base is one important determinant of the financial behaviour and financial preferences of retail finance customers. In this brief we discuss a possible approach for considering this issue and present some of the headline findings from the Invest India Income and Savings Survey 2007 on a variety of financial literacy indicators that were measured in the survey.

This brief estimates the trend in real incomes in different Regions of India between 2004 and 2007. The analysis identifies by Region the extent to which the benefits of strong economic growth have percolated down the income distribution and makes observations on the underlying regional economies concerned.

Remittances in India’s case represent some 3% of GDP and as a result have significant economic and social impacts. IISS Dataworks proprietary data show that receipt by households of remittances has only a marginal impact on income inequality in rural India, as measured by Gini Coefficient, but significant impacts in terms of both the poverty gap and squared poverty indices. It establishes that that domestic remittances reduce the depth of poverty as well as the severity of poverty in rural India to a greater extent than international remittances because in the Indian context international migration is undertaken mainly by economically better off individuals where the incidence of poverty at the migrant household source is anyway lower.

A legacy of a long period of monopolistic government control of Indian retail finance is that public sector finance institutions continue to enjoy the lion’s share of the retail finance customer base. However, private firms are making rapid progress in increasing their share of customers, and even more rapid progress in terms of their share of the aggregate financial savings involved. Comparative data from national household income and savings surveys is employed to show the degree to which this has occurred over the three years between 2004 and 2007.