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                Finance and economics share an inseparable bond since ages. Yet we finance professionals, or to-be finance professionals of different fields such as CA, CS, CMA commit the sin of keeping ourselves separate from economics, yet claiming to be true holders of ultimate knowledge in the field of finance. By means of this article, I intend to convince the readers of the importance that economics holds in our lives as citizens, employees, service providers, consumers, investors, and more importantly as finance professionals!

                The basic principles of economics form the core of some of the important topics that we deal in day in and day out as a part of our professional lives or as a part of the curriculum as students. Let me give you some examples. The foreign exchange rates of different currencies are determined by the forces of demand and supply and occasional intervention by the Central Bank. Demand and supply is a detailed economic concept and so is the working of a central bank. Similarly, the various types of taxes that are imposed, or amendments that are made to the same or even the changes in tax rates that are brought about is a result of the country’s fiscal policy. If we understand the country’s fiscal deficit and related topics, perhaps we can better comprehend the logic behind such changes. The rise or fall in interest rates by the RBI in its monetary policy review is an effort to balance the level of inflation and growth of the economy by controlling the money supply. Next time we help a client raise loan from a bank, we must understand the larger context in which the bank operates, which might help us negotiate a better deal. As students, we learn the concept of opportunity cost in Management Accounting. The same is again also a part of economics. There are numerous examples of such connection between economics and finance. To know the larger picture of the context in which we stand as service providers, it becomes essential to hold economic literacy. Once a finance professional’s economic knowledge is sound, he will be able to deal with his clients with much greater confidence and zeal!

                Professionals such as Chartered Accountants are looked up to as complete business solution providers. And we all know well that the success or failure of a business depends largely on the general economic prospects of the country. The economy of the country has so much power so as to even endanger the solvency of a running business. The general understanding of the economy of our nation will help us know which business are set to prosper in the long run and which ones carry a huge risk from day one. Not only this, it will give us better ideas of running business which can be used to provide consultancy to various business owners.

                Further, the understanding of economics will place us in the larger context of the country and the world and tell us what place we hold in the business around the world and also what role we are supposed to play in development of the same. Needless to say we can better manage our own investments and finances as well!

                Now, even more importantly, not only as finance people, but also as citizens of the country, we carry a right as well as a duty to be well-versed with the strengths and weaknesses of our economy, so as to be able to contribute to the same by becoming informed voters.

                Having got the importance of economic literacy, now let me address the question of how to accomplish this task. Before that, I would like to clarify that though economics seems tough but it isn’t so. Further, we are in an added advantage, belonging to the world of finance and carrying an understanding of the same.

                We must endeavour to first build an understanding of the basic concepts which form a part of everyday news and analysis so as to keep abreast of ongoing changes in the economy. This can be done by means of engaging in the economic news and getting hold of new terms by use of the internet where various topics of relevance can be found explained in really simple language and by the use of visuals and videos. Websites like or even can come in handy. Next, we should start regular reading on the topics we begin to understand so as to give ourselves a practical view of the same. One must also refer to financial and economic newspapers and channels such as The Economic Times and CNBC TV18. Annual budgets must be studied in detail. Once we step into this field, we will soon gather up more and more ideas on how to gain knowledge. More importantly, we will develop a habit of looking for economic news and knowledge as a part of the regular routine. Such knowledge must then be developed and nourished over time.

                From today itself, as I decide to brush up my knowledge in economics, I hope you would too!

Note: Comments and views are welcome.


Published by

CA Surbhi Singhal
(CA, CS, NCFM, Dip-IFR, B.Com)
Category Others   Report

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