Foreword

Household finance research is the study of households’ financial behaviour. It seeks to answer questions pertaining to strategies that households choose to achieve their financial objectives, the factors influencing these strategies and the impact these strategies have on household welfare. A foundational tenet of household finance research is that it attempts to understand financial decisions of households meaningfully, without isolating them from the context they operate in, and their interactions with various institutions ranging from formal and informal advisors to providers and regulators.

In the Indian context, household finance research is an important field of study, given the current state of financial inclusion in India. Barring bank account ownership, which is now universal among Indian households, ownership of a basic suite of products that households must have such as insurance, savings, investment and retirement accounts remains low. Moreover, household interaction with the formal financial system remains limited as they largely save and invest in physical assets such as land and gold. Inadequate access to non-credit products continues to create an over-reliance on short-term credit to manage risks. Problems with accessing and using formal financial services are exacerbated for low-income households, who typically face volatile cashflows, challenging their participation in traditional financial products with rigid structures. Studying household finance from the perspective of low-income households, therefore, makes for an important contribution towards building evidence on ways in which poor households can be integrated into the formal financial system.

This special issue includes four articles that contribute to the field of household finance research and help us understand household financial behaviour in the Indian context, using primary and secondary research methods. The articles also make a methodological contribution to the field by applying a research method ranging from advanced data science techniques on the one hand, and qualitative ethnographic research methods on the other hand, to study household financial behaviour.

Rao and Parthasarathy use an event history analysis approach to quantify the risk of low-income households becoming over-indebted, based on two disparate definitions of over-indebtedness. Rampal and Biswas discuss the socio-economic factors determining investment decisions and household portfolios among low-income households. Gupta, Yagnaraman and Jagati study the intra-household dynamics at play in the context of household financial decision-making, with a focus on understanding how financial goals, responsibilities and decisions differ between husbands and wives in a low-income setting. Similarly, Kurian, Sreedharan and Valenti attempt to understand the financial profile of migrant households and how household members compete for influence over financial decisions, depending on whether the migrant is at home or away. Together, these articles provide rich and nuanced information about the financial lives of different segments of low-income households.

I hope these articles are useful for researchers studying topics at the intersection of household finance and financial inclusion, financial service providers catering to the financial needs of Indian households and policymakers working towards strengthening the financial system infrastructure.