Your kid might, in due course, be able to advise you on your investments in the capital markets. The government plans to introduce financial literacy in the school curriculum very soon, with the long-term aim of increasing the household contribution into equity markets, currently very limited, to reduce over-dependence of the economy on foreign capital.
Veerappa Moily, minister of corporate affairs, recently wrote to Kapil Sibal, his counterpart for human resource development, and also to state chief ministers to include chapters on financial and capital markets in the primary and secondary school syllabi.
“Domestic savings is 37-40 per cent of total savings in our country. But only four-five per cent of these domestic savings goes into the capital markets. We need to encourage domestic investment and make retail investors more confident of corporate India,” Moily told Business Standard.
He said a large part of India’s economy still swings according to the whims and fancies of foreign investors. In the first quarter of this calendar year, foreign institutional investors (FIIs) pumped huge funds into the equity markets, of about $8.84 billion (Rs 50,000 crore), consequently inflating it. However, after April 1, Indian stock indices have witnessed a sharp fall, as these investors have together pulled out $504.2 million (Rs 2,800 crore) from the equity markets since then till today.
In April, FIIs had pulled out $205.5 mn from the stock market. In May, another $58 mn was withdrawn, amid concerns over domestic economic growth and the depreciating rupee. In these first five days of June, FIIs have made a net withdrawal of $240.7 mn (Rs 1,335 crore).
The Bombay Stock Exchange’s benchmark, the Sensex, had gained 1,869.53 points in the first three months of this calendar year, to touch 17,404.20 at the close in March. It then lost 1,409.32 points from April 1 till today, to settle at 16,020.64 . The major reason for the volatility is FII behaviour.
“Ultimately, FIIs should not be the most important factor to determine our financial markets,” said Moily.
His ministry is working on a detailed programme on how basic knowledge on each segment of the capital market could be covered in classroom teaching. Students would also be taught about the gains and risks attached to investments in the market. “This would enable people to understand and become comfortable with such investments. They would realise the importance of these markets and how it can work,” said Moily.
The ministry is also coordinating with the Securities and Exchange Board of India, the capital markets regulator, on the plan, as well as on other strategies to infuse more domestic retail investment into the markets.
In Budget 2012-13, the government had announced the Rajiv Gandhi Equity Savings Scheme to encourage the flow of savings in financial instruments and improve the depth of the domestic capital market.
It allows income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh.