Saswata Choudhury & Sourav Kumar Das, Author at Adamas University

Digital Financial Inclusion: A New Phenomenon of Commerce Education

Information & Communication Technology (ICT) is considered as one of the most effective means for social transformation that can recognized as an efficient tool for education. Due to the rapid advancement of internet facilities, mobile phones, laptops and other modern technology oriented devices, today’s world is going digitalized more rapidly. As technology dominates modern life so there is an emerging need to use ICT in education, commonly known as ‘Digital Education’. Digital Education is nothing but learning assisted by technology, where learning is not restricted within the four walls of a classroom but it can be expanded throughout the world due to the intimation of upgraded technologies in learning.

Financial inclusion or inclusive financing is the process of delivering financial services to the disadvantaged or lowered income group of the society in an affordable cost. The basic objective of the financial inclusion is to promote balanced economic and social development of the society. The process of financial inclusion includes the rendering the financial services to the weaker section, to use of that services by the weaker section and also to improve the financial literacy of the weaker section so that they become able to take their own financial decisions themselves. Two major organizations those are working to lead the process of financial inclusion to success are the banks and the micro-finance institutions. They have stretched their activities in rural areas to provide various financial services to the rural people.

In order to mobilize the financial inclusion program, focussing on the new technologies and the evolving business models, in the year 2016, G20 nations introduced High Level Principles for Digital Financial Inclusion. The major objectives of these principles are to accelerate the government actions to drive financial inclusion using the digital technologies. The 2016 High Level Principles for Digital Financial Inclusion are the followings:

Promote the digital financial services to develop the financial inclusion. It also includes the coordination, monitoring and evaluation of the national strategies and action plans.
Balance between the innovation and risk aligned thereto to achieve digital financial inclusion. In order to do this, identification of risks, its assessment, monitoring and managing need to be done for every innovative strategy.
Provide a balanced legal and regulatory framework for digital financial inclusion.
Expand the infrastructure for digital financial services framework. The digital financial services should be safe, reliable and low-cost and for all the relevant geographical areas, especially for the underserved rural areas.
Establish a wide-ranging approach for the consumers and protection of the data that focuses on issues which are specifically relevant to the digital financial services.
Support and evaluate the programs which help to improve the digital and financial literacy. For this purpose, evaluations are done on the basis of the unique characteristics, advantages and also the aligned risks of the digital financial services and channels.
Provide easy access to the different digital financial services to the customers by developing the customer identity systems, products and services that are accessible, affordable and verifiable. It is also required to balance the multiple needs and risks aligned thereto for a risk-based approach with due diligence.
Track the progress of digital financial inclusion program through an extensive and robust data measurement and evaluation system.

If we consider the present socio-economic scenario, during the Covid-19 and the aftermath, the digital financial inclusion program is the most emerging and appropriate policy for the governments to be undertaken. But, for making it successful, first it is very much necessary to educate the financially illiterate people.

Now, why the digital financial inclusion program will be benefitted by the commerce education? The Commerce education starts at 10+2 level. The financial literacy of the students under commerce education starts from this stage. As they move up to the higher classes, their knowledge relating to the different financial activities and services also grows up. They are always steps ahead of the students of the other streams in terms of financial literacy. Moreover, as the part of the new generation, they are tech savvy also. So, the commerce students are familiar with both financial literacy and digital education. As a result of that, their knowledge in this regard will undoubtedly go to help to educate, in terms of both digital and financial, their families and the people associated with them. Hence, somehow, it will promote the digital financial inclusion program, undertaken by the government. #CommerceEducation#

Why not invest in Mutual Funds during Post COVID 19?

What is Mutual Fund?

In times of enhancing need and mobilization of domestic savings in lucrative investments, the importance of mutual funds have increased significantly. Mutual fund acts as a financial intermediary by pooling up the savings of small and large income earners and help these investors in deriving the benefits of capital market advancement. This intermediation between the suppliers and customers of financial resources gains importance globally on account of attractive returns with reduced risks.

The Mutual Fund industry in Indian economy has been developing constantly since its inception. Its Assets Under Management (AUM) has been experiencing a radical increase from only Rs.25 crores in 1964 to Rs.23.93 lakh crores till April 2020.

Why not invest in Mutual Funds during Post COVID 19?

Since the outbreak of COVID-19 in India, the global contagious disease caused by coronavirus in January 2020, the stock markets have experienced an extensive crisis with severe dampening effects in the entire global scenario. This has affected the Indian Mutual Fund Industry as well.

Due to the lockdown announced by the Indian Government, the economy has got slower and will continue to remain slow over the next few months. For most businesses, the slowdown can be in the form of supply disruptions, fall in consumption demand, and stress on the banking and financial sectors.

The equity markets have seen an unprecedented sell off across the board in the last few months. This sell off has been occasioned by the rapid spread of the pandemic in several countries and therefore, some disruption was expected to happen in the major global economies. Such disruptions affect economic growth, output, aggregate demand and supply, employment and a host of other key macro-economic variables. The adverse impact on these variables results in lower income for households, unemployment, and also lower earnings for companies. It is this chain of factors that caused the selloff thereby magnifying the probability of a global economic slowdown.

Several factors also highlight that the Indian Mutual fund sector is not at all worthy for investment in the present Post COVID 19 scenario:

(i) New Fund Offers (NFOs):

NFOs by mutual fund houses have been dwindling since the outbreak of COVID-19 largely due to the nationwide lockdown and its impact on overall investor sentiment. The number of NFOs was 11 in January, 6 in February, and it further dropped to just one in March and nil in April.

(ii) AUM of Indian Mutual Fund Industry

The total AUM of the Indian mutual fund industry declined by 9.82% between December 2019 and April 2020 due to COVID-19 effect. The AUM of open-ended mutual funds decreased by 9.97% during the same period. Moreover, assets in equity-oriented mutual funds declined by 3.5% between December 2019 and April 2020 due to COVID-19 effect. That apart, assets in equity-oriented mutual funds recorded a continuous decline from February 2020 to April 2020. However, it is noticed that assets in debt-oriented mutual funds and liquid funds increased by 2.2% and 0.8% respectively between December 2019 and April 2020 due to COVID-19 effect.

Table 1: Growth of AUM in the Pre-COVID and Post-COVID 19 scenario (Rs. in crores)

(Source: website of AMFI)

(iii) Retail Participation in Mutual Funds:

The share of individual investors in mutual fund assets declined continuously between December 2019 and April 2020. On the other hand, the Indian mutual fund industry witnessed an increase in the share of institutional investors in mutual fund assets continuously from December 2019 to April 2020.

Table 2: Share of Individual and Institutional Investors in Mutual Fund Assets (%)

Month	Individual Investors	Institutional Investors
December 2019	53.4	46.6
January 2020	52.7	47.3
February 2020	52.7	47.3
March 2020	52.2	47.8
April 2020	52.1	47.9

(Source: website of AMFI)

(iii) Debt Fund crisis on account of COVID-19 outbreak with reference to Franklin Templeton Mutual Fund:

The reason for debt fund crisis in Franklin Templeton Mutual Fund was dramatic and sustained fall in liquidity in certain segments of the corporate bonds market on account of the COVID-19 and the resultant lock-down of the Indian economy. Franklin Templeton invested in lower quality papers/instruments for generating more returns. Lower rated papers usually have very low liquidity as they cannot be sold immediately in the market at a fair valuation in India.

This incident shattered the confidence of the entire debt mutual fund investors, who rushed to withdraw their investments from credit funds as well as other debt MF schemes.

(iv) Mutual Fund Returns:

As per statistical data on Mutual Fund returns obtained from Mutual Fund Insight report 2020, it has been observed that amongst debt funds, mid-duration, short-duration, ultra short-duration and credit risk funds performed better in the pre-COVID period. Surprisingly, long-duration debt funds and dynamic bond funds performed better in the post-COVID period.

Post-COVID returns of all equity funds except pharmaceutical funds were negative in 3-month and 1-year. Amongst equity funds, large-cap funds, international funds, pharmaceutical funds and technology sector funds generated positive returns in the post-COVID period in 3-year. 5-year and 10-year post-COVID returns of all equity funds were positive barring infrastructure funds which generated negative returns in the 5-year period.

Thus, the market fall was like a financial cyclone that waved away the faith and stability despite miscellaneous liquidity measures taken by the Government of India. The markets were worried on account of lack of clarity in near future. This led to massive fluctuations in the markets, which in turn affected the Indian Mutual fund sector. Again, with the sudden shut down of six debt funds of Franklin Templeton, the investors’ fear grew up with increased lack of confidence about the way forward.

However, this tough realism of drastic phase will again be overcome with boom in near future as soon as this pandemic moves out with invention of coronavirus vaccines with reduction in number of affected and deaths along with the implementation of several innovative government policies.

Future Prospect of Real Estate Sector in India in the post Covid-19 Scenario

We are already aware of that the outbreak of Covid-19, the global pandemic of the century, is the major reason behind the present global economic slowdown. India is also one of the worst sufferers due to its huge population and the high population density. The global lockdown, the most effective preventive measure of Covid-19, halted the economic activities of the country, causing the economic slowdown.

Both commercial and residential real estate sectors in India are also suffering from the outbreak of the global pandemic. The real estate sector in India was already under stress during the year 2019 due to the credit squeeze, high leverage, rising non-performing assets in the construction finance and also due to the overall economic slowdown. This pandemic too added a jolt towards the growth of this industry. The following figures are showing the recent scenario of the real estate stocks, listed with the Bombay Stock Exchange (BSE), in India.

Figure 1: BSE Realty Index (6 Months) Source: Moneycontrol

Figure 2: BSE Realty Index (3 Months) Source: Moneycontrol

Figure 3: BSE Realty Index (1 Month) Source: Moneycontrol

The indices are considered as the smartest indicators of the economic condition of a country. The above three figures, extracts of the BSE REALTY, are clearly showing the current market status of the real estate stocks in India. The prices of the stocks of the real estate firms hit the rock bottom during this lockdown period. Furthermore, the market moved flat during the last three months. The real estate industry is still a labour intensive industry. The reverse migration of the workers, prompted by the nation-wide lockdown, also affected this labour intensive industry. However, the cut in the policy rates, by the Reserve bank of India, could boost the real estate market. But, lay-offs, pay-cuts and lesser job security of the employees reduced the demand in the housing sector which also added worries to the real estate market.

The market experts are expecting more reduction in the post Covid-19 market scenario. The rating agency India Ratings expects that there will be a decline in the residential real estate market in India. The National Real Estate Development Council (NAREDCO) is also expecting around 10 to 15 percent drop in the real estate market in India. NAREDCO is expecting a loss of around Rs. 1 Lakh Crore in the realty market due to this global pandemic. But, Mr. Deepak Parekh, the Chairman of the mortgage lender Housing Development Finance Corporation (HDFC), is expecting around 20 percent reduction the real estate prices due to the corona virus pandemic and the global lockdown. In fact, government had announced various incentives for affordable housing. But, at that point of time, the outbreak of corona virus pandemic halted the Indian housing market.

But what is next for the real estate industry? Industry experts are not expecting growth in this industry in the near future, i.e., for the next six months to one year. It will certainly take time to go back to its normal flow of activities. In reality, we have to wait till the economic activities catch its’ own path, as it was in the pre-Covid-19 stage. Moreover, India may become a favourite destination of the investor as most of the nations do not prefer China for their controversial role during the global Covid-19 pandemic.

Then what is left for the investors of the real estate stocks? For the stock market investors this is the right time to invest in the real estate stocks as the market is under sluggish condition right now. It is expected that the market will going to be surged after six months or one year. The investors will get their expected return from the stocks, in which they have made their investments, if they hold it for a long term. The investors, who are already holding the stocks under this sector, are suggested to stay invested to get “The Fruit of Patience”.