Our Observations on RBI’s June 2019 Financial Stability Report
By Monami Dasgupta & Vishwanath C, Dvara Research
Household Finance research is an emerging field in India, and we are at a formative stage in understanding its scope, theory and methods. One of the objectives as part of the Household Finance Research Initiative at Dvara Research has been to take steps towards understanding the landscape of existing research on various dimensions of financial well-being for households and individuals. This has, among other things, involved generating empirical evidence from the population, often with an intent to observe, capture and explain outcomes that are deviant from the normative theory. For instance, one of the well-known deviations from normative theory can be observed in average Indian households that categorically display balance sheets that are heavy on physical asset ownership and low on financial asset participation and usage. The normative theory expects households to allocate assets more towards financial assets than physical assets for better returns and risk management. However, the societal orientation, along with market inefficiencies in India tends to push households towards greater allocation in physical assets.
While making progress in conducting better research in household finance, we identified three broad types of constraints to high-quality research in India today: the motive to study households, easy accessibility to high-quality granular datasets and effective feedback mechanism that loops in all consumers of the research. A starting point for conducting sound research in this field, expectedly, begins with the accessibility to and the availability of relevant and context-specific evidence.
Given this understanding and to address this gap, we focused on the broad theme of Financial Well-Being and built a repository of existing evidence in relation to it that we called – The Financial Well-Being Evidence Gap Map (FWB-EGM). The FWB-EGM is an interactive online repository that allows researchers worldwide to explore evidence on various dimensions of Financial Well-Being of individuals and households as well as to detect gaps that reflect the lack of any existing evidence. The FWB-EGM was created after reviewing and systematically organising academic literature (we chose 100 academic papers to start with) from multiple areas of financial well-being.
In addition, to further address the data lacunae, we also set-up a one-stop location to access publicly available household finance data in India – The Dvara Open Online Repository (DOOR). The DOOR is a carefully curated catalogue of datasets which are a product of various research efforts testing different hypotheses by studying household-level financial decision making. It aims to bridge the gap between researchers and data by compiling publicly available survey data and making it available through a single user interface. We also intend to expand the scope of the DOOR to include administrative data of financial institutions, providing a more robust stream of data that can be used to design as well as analyse financial products simultaneously.
The FWB-EGM and DOOR could be a convenient resource to track, visualise and detect gaps in evidence-based research on various aspects of Financial Well-Being in India. In combination, the tools can provide researchers with access to a range of high-quality datasets in a user-friendly format that they could potentially use to plug critical gaps in household finance research. In the recently concluded webinar, we further detail these tools and how they could be used in refining research objectives that advance our thinking on household finance.
