An empirical analysis on household financial vulnerability in India: exploring the role of financial knowledge, impulsivity and money management skills
ISSN: 0307-4358
Article publication date: 22 March 2022
Issue publication date: 9 September 2022
Abstract
Purpose
The COVID-19 pandemic has exposed the financial-economic vulnerability of the public and threatened the household financial stability, especially of the low-income group population, in developing economies such as India. The assessment of household financial vulnerability has gained considerable attention these days, especially in poor and developing countries. This article seeks to assess the level of household financial vulnerability in India, based on a household survey conducted across India.
Design/methodology/approach
This paper has proposed a financial vulnerability index (FVI) based on three self-reported parameters: (1) making end meet, (2) perception of income shock and (3) perception of expenditure shock. Subsequently, the impact of various behavioural and socioeconomic factors on the proposed financial vulnerability index has been assessed using fractional probit regression.
Findings
The research findings indicate that higher financial knowledge, better money management skills and lower impulsivity in financial behaviour can reduce financial vulnerability. It is suggested that suitable financial literacy programmes be implemented for vulnerable sections of society to enhance their financial knowledge, improve money management skills and manage impulsivity, thereby helping them make informed financial decisions leading to their financial well-being.
Originality/value
To the best of the authors’ knowledge, none of the past studies have developed and assessed the financial vulnerability index in India. This study provides relevant recommendations for various financial sector regulators and government institutions in India.
Keywords
Acknowledgements
The authors would like to thank Indian Institute of Corporate Affairs for making the data available for the purpose of this research.
Citation
Singh, K.N. and Malik, S. (2022), "An empirical analysis on household financial vulnerability in India: exploring the role of financial knowledge, impulsivity and money management skills", Managerial Finance, Vol. 48 No. 9/10, pp. 1391-1412. https://doi.org/10.1108/MF-08-2021-0386
Publisher
:Emerald Publishing Limited
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