Financial Indianisms

Noor Samra
Nov 3 · 7 min read

The news that Richard Thaler, a somewhat controversial economist, winning the Noble Prize for his work in the field of Behavioural Finance threw up some interesting thoughts in my mind. After all, it isn’t hard to believe that human traits affect an individual’s economic decisions and perhaps large scale market outcomes as well. In fact, why just human traits, economic behaviour is also impacted by culture, tradition, modernity and many other such forces that do not neatly fit into models of rational behaviour. And what better place than India to look for some interesting examples.

Look at Diwali for instance. Apart from being the festivals of lights, it’s also the festival when Lakshmi, the Goddess of money, is supposed to shower her blessings and make devoted households wealthy. Diwali is the time for gifting family and friends, to be extravagant and spend lots of money, even dabble in some amount of gambling. The operating logic being, spend more this year, so that next year, you’re blessed with even more money to spend.

As per the sociological perspective, religion & festivals have always been linked to the functioning of economies — it’s one of the ancient ways to circulate money in the market, enable exchange of goods & services & perhaps that is why such a belief was put into place, in the first place. However, the startling part of this shebang is the blind faith Indians place on a precarious logic — rarely do we take out time & deliberate over ‘HOW’ will we get more money to spend next year; it’s assumed it will happen on its own, miraculously. Perhaps the headiness of religiosity & celebration in the air during Diwali time, suspends our rationality & lulls us into submission. Or it’s just a happy resolve that gets planted in our systems; to hope for the best and sometimes that ‘best’ does arrive in some form of prosperity, in kind or in cash but, establishing the cause and effect in this case is rather difficult. Nonetheless, it is a powerful cultural force that calls for recurrent investments, irrespective of concrete returns.

Another major cultural force that has impacted economic behaviour has been the prevalence of Patriarchy. Back in the day, when men were the primary bread earners and women were designated homemakers, most households ran on the similar economic strategy. The homemaker was given some amount of the monthly salary to take care of household expenses. Significant anecdotal evidence suggests, that this amount was never enough. Despite not having enough, homemakers not only managed to pay all the bills but also managed to save some loose cash for themselves. The ingenious ways with which homemakers BARGAINED their way through expenditures was what enabled this kind of saving. Extreme pains were taken to keep track of all transactions, to not let the ‘hisaab’ slip away, to cut costs where ever they could, not let even a penny go to ‘waste’.

On the other hand, even the most ardent penny pinchers let go of all their control when it comes to the big fat Indian wedding. Somehow a marriage occasion justifies spending copious amounts of money to please the wedding guests, despite knowing that even the most extravagant & well organised marriage events fall prey to whines of nagging family members/ guests. Penny wise, pound foolishness indeed, isn’t it?

The importance that we place on a marriage occasion is perhaps one reason that has put such a practice in place. As per Van Genep, noted ethnographer, seminal life events such as coming of age, marriage, child birth etc. and the rituals associated with these are important ‘Rites of Passage’ that announce to the world, as well as indicate to the individuals in question, the change in their ‘status’. In a way, rites of passage are meant to prepare the individual for the new roles and responsibilities he/she is about to take up. Looked at it from this lens, marriage rituals are meant to hold a certain level of ceremonial significance.

However, over the years, ritual significance has been supplemented with pomp and grandeur. A relationship has been established between the status & spending. The amount of money one spends on a marriage is directly proportional to social status of a family. The more you spend, the more social status you earn. However, many new age Indian brides/ grooms, as well as their parents, are increasingly finding faults with this practice. Economically, it is rather senseless. The investments are alarmingly large and the returns are next to nothing. It would make much more sense to use this capital amount to make investments that give better returns- higher education for instance. Despite knowing all this, these practical Indian brides/grooms and their parents succumb to the social pressure of having to throw a lavish do, because ‘log kya bolenge’?

It is indeed quite a feat, what Indian parents have managed to pull off, the kind of expenses they incur through their life, that too with rather lethargic saving schemes. Not as much as a nudge, as Thaler puts it, but back in the day, when India had come out the clutches of British rule and the baton was passed on to a newly formed government to run the country, government centric saving schemes were the only steady option for many Indians. Till today Indians find a great sense of security in schemes like PPF, Post Office Funds, Fixed Deposits, all economic instruments with rather petite rate of returns, that barely take on growing inflation.

Unlike today, when young Indians are at least trying to look out for newer, more aggressive means to save, their parents on the other hand were happy with whatever kinds of returns government schemes offered. The cultural belief that one needed to be ‘CONTENT’ with whatever God has given in this life, that one needed to practice ‘RESTRAINT’ instead of desire for more, in line with dominant code of that time — BRAHMINICAL RESTRAINT, is perhaps what caused them to settle for whatever came their way.*

Given that the emerging India’s code is changing from Brahminical Restraint to KSHATRIYA values, contentment of erstwhile era is giving way to need for SUCCESS, restraint is giving way to DESIRE, knowledge is being supplemented with ACTION/ DOING, destiny as given is changing to DESTINY SHAPED BY ONE’S ACTIONS. Given this context, the CODE OF SAVING itself has changed — it is no longer about STORING money in a safe environment. Rather it has become about GROWING money, so that we can do more, be more. This is perhaps why saving in Mutual Funds, Equity Linked Saving Schemes and other more aggressive means of saving have taken off lately.

But it’s not like the new age Indians do not have their fair share of financial eccentricities. The Kshatriya mindset has also put in to place, an accent on ‘social competitiveness’- A desire to be better than the others, more successful than the next in line, more unique than the already distinguished, happier than what one was yesterday. And the advent of social media has added fuel to fire. Every day, every moment is an opportunity to show off & gather social currency — by visiting the hippest, newest haunts in town; by indulging regularly in gastronomic adventures; by travelling to far ends of the world to be branded as well travelled; by spending unabashedly on experiences and broadcasting it on social media. A new kind of social pressure is taking shape in the form of ‘FUN ANXIETY’ — the need to have fun, more importantly, the need to be SEEN while having fun, at an alarming regularity.

It surfaces in questions like, where are you going for vacation this year, what did you do for your birthday, what plans for weekend and so on, necessitating you to make ‘fun plans’. And many are crumbling under this pressure, spending copious amounts of money to be able to project their ‘fun quotient’ without realising the impact on their financial standing. That’s perhaps why there’s a need for financial apps like Walnut to exist. The app simply takes SMS updates from your bank and uses infographics to segregate & show your spending patterns on eating out, shopping, travelling etc. perhaps because many of us, so called experience seekers, aren’t being able to see the larger picture & recurrent patterns, when it comes to our spending habits. The emerging cultural need to have fun and the desire to broadcast it to the world is clouding our judgement, compelling us to spend large sums of money on short lived experiences without thinking about the long term impact on our financial standing.

While it may appear as though but, the attempt here is not to criticise social & cultural forces that influence our economic behaviour. After all, Diwali gifting, big fat Indian weddings as well as, collecting memorable experiences with family & friends and other such social occasions exist to enrich our lives, punctuate it with moments of happiness & togetherness. Having said that, it is equally important for us to harmonize societal expectations with individual pragmatism. Be inventive enough to balance what society & culture prescribe with what the pocket allows for. Be respectful enough to cultural practices by getting the intent right. But, be discerning enough to not get swayed and swallowed by the economic pressures that come with them. Be perceptive enough to counterbalance short term benefits & long term financial requirements. Be open minded enough to allow for some twists on tradition and some modesty to modernity, for the sake of our hard earned money!

*Source: https://economictimes.indiatimes.com/news/company/corporate-trends/the-changing-mindset-of-bn-minds/articleshow/2015838.cms

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