Why Indians Fail at Managing Money: Tax Evasion, Debt Crisis, and Future

According to the NSE (National Stock Exchange) survey, only 4% of Indians invest in the stock market, as many have considered it a game rather than a serious means to build wealth.

Financial literacy is still a huge issue in India. A S&P Global Financial Literacy Survey reported that only 24% of Indian adults are financially literate, which is one of the lowest in the world.

Parenting and Societal Culture

In India, parenting styles often do not cover financial education, thus making a huge gap in the money management skills of the children. The family never discusses income, savings, or investments; that makes people uncomfortable discussing finances.

Marriage and status pressure: Families spend thousands on lavish weddings, high dowries, and all the festivals but hardly focus on long-term financial plans or investments.

The other side of the coin is that Gujarati families or business-oriented communities bring children up with a very good base knowledge of finance. Children are taught their basics from a very young age.

Academics Do Not Apply

Business and finance are learned at even the most elite institutions from professors with little real-world experience.

•These experts have never run a business, or an industry. Never even been involved in investments as they make their livings as teachers.

In the US or business-oriented Indian communities, professors are usually very hands-on in entrepreneurship or finance. This practical exposure provides the students with a chance to learn from real examples, failures, and successes.

Effects of Lack of Financial Literacy

Fewer Taxpayers in India

India has a large population, but the taxpayer number is alarmingly low due to a lack of financial education and tax awareness.

• Taxpayer Statistics:

According to the Press Information Bureau (PIB), 8.18 crore ITRs were filed for the assessment year 2023-24, which reflects the low taxpayer-to-population ratio. Read More

Tax Evasion

Tax evasion is the illegal avoidance of payment of taxes that a person or a business owes to the government. People do this by lying about their income, hiding money, or creating false documents to pay less or no tax.

Some statistics-

• 2,68,537 crore worth of evasion of GST has been found between 2020-21 and 2022-23.

• In Income Tax raids over five years, Rs 6,662 crore of assets were recovered, which just shows the scale. Read More

DGGI saw a 46% growth in cases involving evasion Rs 1.98 trillion in 2023

The Directorate General of GST Intelligence (DGGI) in the calendar year 2023 detected a 46 percent surge in duty evasion cases to 6,323 cases valued at Rs 1,98,324 crore with voluntary payment of Rs 28,362 crore. It also arrested 140 people in goods and services tax (GST) evasion cases, said a release from the Ministry of Finance. Read More

140 masterminds behind GST evasion cases and 116 behind ITC frauds were arrested in 2023.

Debt Crisis

Matches closely, with an 84.5% debt-to-GDP ratio reported as of 2023 and big government borrowing targets mentioned.

Read More

Personal Loan Growth:

Personal loans in India have skyrocketed lately. In 2022, as per RBI data, personal loans grew by 18.7% that aggregated at ₹32.6 lakh crore.

Credit Card Debt:

Credit card debt has also increased manifold, and as per the RBI, the outstanding credit card debt will touch ₹1.2 lakh crore by 2023, a 20% increase from the previous year.

With credit card interest rates ranging from 30% to 40%, many people get trapped in a cycle of debt.

Empowering Financial Knowledge for a Stronger Future

Today, India has 467 million YouTube users, but most of them use this application for entertainment purposes rather than education and skill development.

Entertainment is not bad, but much of the opportunity to develop financial skills is missed without the free availability of options such as YouTube, Coursera, and Khan Academy.

Books That Will Help You Get Started

Here are a few books that will give you a solid foundation in personal finance:

• “Rich Dad, Poor Dad” by Robert Kiyosaki: This book gives you an insight into how the wealthy think about money and how to build wealth.

• “The Intelligent Investor” by Benjamin Graham: A classic for anyone who wants to understand long-term investing principles.

• “You Are a Badass at Making Money” by Jen Sincero: Make you develop a positive mind about money and wealth.

• “The Psychology of Money” by Morgan Housel: Teaches behaviors driving your financial decision-making

• “The Millionaire Next Door” by Thomas Stanley: Habits that self-made millionaires adopted and how to acquire theirs

The Power of Free Resources

The internet is free for all. Whether YouTube videos, free courses in Coursera, or blogs explaining financial management, investments, or taxes are your thing, everything’s just a click away.

Quit relying on others for money matters. Learn instead. This education on financial independence, business strategies, and making money is no longer something for the privileged; it is accessible to all.

YouTube channels such as Pranjal Kamra, CA Rachana Ranade and Ankur Warikoo offer the best free financial education.

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